No response on Labrador power line

Ashley
Ashley Fitzpatrick
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No explanation from province why decision not yet made on key infrastructure

At the Jan. 24 swearing-in of interim Premier Tom Marshall, provincial Natural Resources Minister Derrick Dalley was asked if the province would pay to build a new power transmission line from Churchill Falls to Labrador West. The minister told reporters a decision was expected in the next week or so.

Derrick Dalley

No decision has been made. A spokeswoman for his department has suggested one might not come  this week either.

No explanation has been offered as to what is holding up approval — or disapproval — of construction of the power infrastructure, estimated at about $300 million.

A continued lack of decision on the part of the minister and cabinet may negatively affect the province.

Alderon Iron Ore executive chairman Mark Morabito told The Telegram Friday that Alderon’s Kami mine project — offering 800 construction jobs, 500 full-time jobs post-construction and a steady flow of mining royalties — is being put under strain by the government’s lack of movement on the power line.

The company can use diesel generators during construction, but it is expected the Kami mine will need 100-120 megawatts of power once operational. Alderon’s hope was to feed that power need from the new Churchill Falls to Lab West line.

The company said it needs an irrevocable commitment to the line’s construction to secure financing to get the mine into operation.

“We were working on it for over two years,” Morabito said of the project’s power plan. The statement is confirmed through documentation filed as part of the provincial environmental assessment process.

“We knew that if we didn’t get the power line commitment, there was no way for us to raise the principal sum of money required to get into production,” he said.

The company is trying to move forward with a billion-dollar debt facility to secure the Kami project’s future — working with a syndicate of banks. That plan was announced in September, with the hope the province might get around to dealing with the power line question.

“There’s no way that deal can close without a power commitment. And so, if you can’t close the deal with the lenders because they won’t give you the money because you have no power, then you also have no project,” Morabito said Friday.

“We’re not Vale or Exxon or any other of these big companies. We’ve only got one project. And what we have to do is we have to raise enough money in each round of financing to get us to the next round of financing.

“You have to complete certain things with that money and if you don’t you’re not going to get to that next round. And for us, we’re out of time. We’ve pretty much accomplished what we need to accomplish other than getting this power commitment,” Morabito said.

On the environment minister’s desk since October 2013, the Kami project was released from provincial environmental assessment Jan. 10.

Similarly, as the company stated in December, the proposed power line has been moved through stages of engineering by Nalcor Energy and a power purchase agreement prepared. Everything is ready to go, when — if — the PC government commits to building the line.

“The power line is needed. The government’s always known we had a hard deadline, but to be perfectly honest, I think Kathy Dunderdale had bigger priorities and other problems and it just didn’t get done,” Morabito said.

The proposed power line construction has plenty of support in the resource-rich mining region. It includes the local chamber of commerce, towns of Labrador City and Wabush, and MP Yvonne Jones. Along with those public supporters wait Alderon’s senior management, its international partners, investors and potential contractors.

“Quite frankly, it’s hard to understand why it wasn’t part of the original (Muskrat Falls) project when you consider one of the arguments that was made around the Muskrat Falls project was that it would support economic development through the mining industry, in this case in Labrador West,” said Liberal Leader Dwight Ball.

The provincial government can OK spending for the power line without referring it to the Public Utilities Board (PUB) and Ball said he supports taking it that route at this point, given the Kami project timelines. The PUB, he added, should then be left to set the rate for the company’s use of the province’s new energy transmission asset.

The price-for-use set by the PUB would be in addition to the industrial power rate charged to Alderon for the power it uses. The added cost put to the company by the PUB would help, over time, to cover the cost of the power line’s construction.

NDP Leader Lorraine Michael wants to see a PUB review of the construction before it is approved. “It’s a big piece of work that’s being talked about here. I think that (PUB review) could happen without stopping the project,” she said.

If not, she added, “I think the government has to take responsibility for the fact there’s been two years when this could have been dealt with, and why wasn’t it being dealt with?”

The Telegram contacted the Department of Natural Resources shortly before 9:30 a.m. Monday and was told the minister was travelling during the morning. A request for a brief interview was to be put to him later in the day, with a written statement from any department official also welcomed.

There was no response as of deadline.

Despiteconcerns around the power line approval and financing, as of Jan. 15 Hebei Iron and Steel chairman Yu Yong indicated Hebei remains fully committed to the project as a key partner.

“The Kami project jointly undertaken by the HBIS and the Alderon Iron Ore Corp. will help ensure long-term, steady and low-cost supply of high quality iron ore for our group and thus increase our cost competitiveness,” he stated, in a letter to Canada’s ambassador to China, Guy Saint-Jacques.  

As reported, the provincial government has spent over $300,000 since 2010 on trade missions to foster Chinese investment into Newfoundland and Labrador’s mining industry — including at least $100,000 for travel by Natural Resources staff and the $200,000 on the provincial government’s 2013 trade mission to China.

A lack of clear communication on key issues like the power line, Morabito suggested, has the potential to harm international relationships being developed.

The Alderon project still requires release from federal environmental assessment. A decision from the federal review is expected later this month.

 

 

Organizations: Iron Ore, Public Utilities Board, Lab West Exxon Department of Natural HBIS Alderon Iron Ore

Geographic location: Newfoundland and Labrador, Wabush, Hebei Canada China China.A

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Recent comments

  • DON II
    February 05, 2014 - 15:59

    It appears that the company does not know how the Government of Newfoundland works. The Government knows that the company cannot get financing without a power line construction commitment from the Government. So, the Government has the company over a barrel and can extract whatever deal it wants to extort from the Company. Did these come from aways not do any research on how the Government of Newfoundland operates? The company has only two choices now folks, either buckle to what the Government want you to agree to or walk away empty handed! The Government knows there will be another victim coming along later that they can do the same thing to! The mining company President should give the President of Abitibi a call and find out what Abitibi thinks about doing business with the Government of Newfoundland! I would like to hear that conversation and watch the smoke and sparks coming out of the telephone.

  • Corporate Psycho
    February 04, 2014 - 18:52

    Alderon can afford to buy their own line. Why are subsidizing it?

  • Maurice E. Adams
    February 04, 2014 - 15:29

    If $240 million of taxpayers/ratepayers money is what will stop a multi-BILLION dollar mining project, then surely one would be wise to ask "How feasible is such a mining venture --- a venture that still needs an additional $1.5 billion in investment?"

  • Jon Smith
    February 04, 2014 - 12:02

    Interesting for the new interim premier. Build the line and where will the power come from?Muskrat, its already committed for Holyrood replacement and Emera/NS; Upper Churchill recall power now been wheeled through Quebec under a contract with Emera; Upper Churchill under a yet negotiated purchase agreement with Hydro Quebec and wheeled over a line now to be built by Newfoundland.

  • Jon Smith
    February 04, 2014 - 11:59

    Interesting for the new interim premier. Build the line and where will the power come from?Muskrat, its already committed for Holyrood replacement and Emera/NS; Upper Churchill recall power now been wheeled through Quebec under a contract with Emera; Upper Churchill under a yet negotiated purchase agreement with Hydro Quebec and wheeled over a line now to be built by Newfoundland.