Kennedy speaks on Muskrat Falls
Natural Resources minister Jerome Kennedy spoke about the Muskrat Falls Project during debate on the 2012 Budget in the House of Assembly on Thursday, May 3 and Tuesday, May 15. Read the speeches here:
Muskrat Falls – Options and Alternatives
May 15, 2012
- Transcript original file
- Hansard for May 15, 2012 (delayed posting)
- Video file
- Webcast of House of Assembly proceedings (at about 00:19:20)
MR. SPEAKER: The hon. the Minister of Natural Resources.
SOME HON. MEMBERS: Hear, hear!
MR. KENNEDY: Thank you, Mr. Speaker.
I had indicated last week that during the Budget debate I would have three opportunities to speak for twenty minutes at a time and I was going to use those timeframes to speak about Muskrat Falls.
I spoke last week about the need for power. Tonight I am going to speak about options and alternatives, and next week, Mr. Speaker, if I get a chance to speak again, I will talk about the effect of Muskrat Falls on electricity rates. I will talk about environmental economic benefits, debt, cost overruns, and things like that.
Mr. Speaker, last week I prefaced my comments with the two basic questions: Do we need the power? If so, what is the best way to deal with the issue for the need for power? What is the lowest cost option?
Mr. Speaker, in terms of the options, what are the options once we determine we need power? One is to develop Muskrat Falls for the Labrador-Island link; that is the interconnected option. The second is to refurbish Holyrood with a combination of small hydro and wind which would be referred to as the Isolated Island option; to develop Gull Island; to use natural gas. Number five, Mr. Speaker, would be to use wind; number six would be to recall power from the Upper Churchill; number seven would be to import power from Quebec; or to do nothing. Mr. Speaker, to do nothing is not an option because we need the power. We have heard other members in this House over the last week or so concede that point, that we need the power.
Mr. Speaker, while we would all like to develop Gull Island, which is approximately 2,000 megawatts of power, it is not an option at present because we cannot get transmission access across Quebec. Four decades of Newfoundland and Labrador politicians, Mr. Speaker, have tried to negotiate with Quebec to resolve this issue, all without success. With all due respect to the member of the Opposition last week who said it does not matter to him whether he deals with Nova Scotia or Quebec, there is no difference – well, Mr. Speaker, there is a significant historical difference in dealing with Quebec. There is no dealing with Quebec on the issue of hydro-electricity power in Labrador.
This all begins, Mr. Speaker, in 1927, with the decision of the Judicial Privy Council defining the Labrador boundary and giving Labrador to Newfoundland. Quebec has never forgiven us for that. At some point in this House over the next few weeks, I hope to talk about the Upper Churchill; I will trace to 1927, along with documents that were relied upon in the 1960s, along with quotes from the Premier of Quebec and the Premier of Newfoundland at the time, Mr. Speaker, and René Lévesque, the Minister of Energy in Quebec at the time.
It is what is referred to, Mr. Speaker – I think it was a journalist in Quebec who coined the phrase, it was the revenge of geography, that the Upper Churchill had nowhere to go and we were back to that 1927 decision. In fact, we will still see maps from Quebec that show the border as it used to be still to this day, Mr. Speaker.
What we do have at present, Mr. Speaker, is a reservation to export 265 megawatts of power on Quebec transmission lines. We are currently in legal wrangling in Quebec in the courts with their Régie, or equivalent of their PUB, on obtaining open access.
We need to develop Gull Island. The most that we can export at present on the Quebec lines is 265 megawatts of power. Gull Island is not an option at present. As I think I said last week, Gull Island, there is a market for that power, certainly in Ontario.
We have all heard Nalcor has concluded that Muskrat Falls has a cumulative present worth of $2.2 billion, or is $2.2 billion cheaper than the Holyrood option, Mr. Speaker. MHI, the company hired by the Public Utilities Board, has also accepted that conclusion. We have a $6.2 billion project at present, subject to the Decision Gate 3 numbers, which break down as follows, in terms of cost to our Province: $2.9 billion for the generating station and $2.1 billion for the Labrador Link.
Mr. Speaker, last week I talked about the price of oil and why Holyrood becomes so expensive, when at peak it burns 18,000 barrels of oil a day. It only currently operates at 15 per cent to 25 per cent. What we have to plan for, what utilities plan for, is that coldest day in the winter when you need the most energy.
Last week I talked about PIRA and why the price of oil will continue to rise, at least in their opinion, Mr. Speaker. It has to do with the factors such as the activities in the Middle East, supply and demand, growth in China, growth in the middle class, and the issue of security of supply.
Interestingly enough, Manitoba Hydro International did a sensitivity analysis where even if oil went to $40 a barrel – we can say never say never, but the likelihood of that happening is minimal, Mr. Speaker – Muskrat Falls would still be cheaper than the isolated option by $120 million.
I think we heard this the other day: why don’t we continue to use Holyrood till 2041? Mr. Speaker, Holyrood will not last until 2041. We heard the Minister of Transportation talk the other day on the environmental impacts of Holyrood, where closing down Holyrood would be the equivalent of taking 300,000 cars off the road. That is why we use the experts. That is why we use Nalcor, Mr. Speaker. We look at inherent risk and uncertainties; whatever project we do will have risks and uncertainties. Anytime you are looking into that crystal ball, in the future there are going to be risks and uncertainties. What we have to try to do is minimize those risks and identify the uncertainties, because if we need the power, we have to do something. It is that simple.
Now, Mr. Speaker, natural gas has been put forward as an option. There are two ways that natural gas could be utilized. The first would be the importation of natural gas where we would buy gas from, for example, the United States. The price of natural gas is currently less than $3 per million cubic feet, Mr. Speaker. That is not the cost, though, to deliver that to Holyrood, because what you have is a situation where you have to add liquefaction costs, transport costs, regasification costs. So the Henry Hub price, or the price of which gas is measured, is not the delivered price to Holyrood. Beyond the cost of building a terminal, Mr. Speaker, an LNG or liquefied natural gas terminal, you have to get your gas.
It would have to be, according to Dr. Wade Locke, at least $2.2 billion cheaper than Muskrat Falls. According to Dr. Locke’s calculations, Mr. Speaker, natural gas would have to cost less than $5.75 delivered to be cheaper than Muskrat Falls. The spot prices that are currently being paid in Europe and in Asia are $13 and $16; we cannot compete. The amount of gas needed for Holyrood – we are not going to be burning natural gas here in our Province; we are not set up for that, Mr. Speaker, in terms of our homes.
That cost will continue to rise. The experts predict that it is only going to go to $6 for a million BTU in the next decade, but the delivered cost, what you pay will be much greater to have it delivered. We would be competing with China and Europe. We would be a very small player in a very big market, and vulnerable to a volatile market, because we cannot compete with these countries. Why would any company sell gas to Newfoundland and Labrador for such a small amount when they can obtain higher prices in the European and Asian markets? Mr. Speaker, we would still be dependent on volatility of fuel prices.
Mr. Speaker, even if natural gas was an option, it does not do anything for these mining projects in Labrador. What is it that we are going to do: change Holyrood to natural gas to provide power for the Island which we need, and then develop Muskrat Falls? Muskrat Falls is the only option, Mr. Speaker, which can deal with the needs in Labrador and the needs on the Island.
We have met with independent experts, market analysts, and industry representatives; we have heard from Dr. Locke, Mr. Speaker, and those are the numbers that we have today. The other option that has been put forward is to build a 350 kilometre to 600 kilometre pipeline from the Grand Banks. Mr. Speaker, that is a capital cost of a minimum $1 billion to $2 billion, but then, how do you get the gas?
There is a very practical issue of who owns the gas. According to the Atlantic Accord, it is governed by both the federal and provincial governments in terms of the C-NLOPB, so the Province cannot force the oil companies to develop. I have met with the oil companies, Mr. Speaker. The Atlantic Accord provides for joint management of the offshore and requires federal and provincial concurrence to development decisions or amendments.
We do not have any legislative authority, Mr. Speaker, to order an existing project to deliver gas to the Province, so the low price of gas at present is a deterrent to development. I think it went below $2 per million cubic feet in the last month. What we are told by the oil companies is that the price needed to develop it would be a minimum $10 to $12 per million BTU. The price in the next decade, we are told, will stay around $6. Natural gas, Mr. Speaker, is part of our energy plan, but there is no pressing present need to develop it. The reason that no proposal has been received to develop the gas and build the pipelines is because it is not economically viable.
Mr. Speaker, the best way I can describe it was one oil executive who said: We are in the business of making money. If we could make money we would do it.
What we have decided to do, Mr. Speaker – I am just outlining the facts as I understand them today; what we are willing to do is to obtain a report that will outline these options, that will examine the options of both the importation of natural gas, and also the building of the pipeline. A company out of Calgary has been commissioned to prepare a report and when that report is prepared, Mr. Speaker, it will be provided to the public and to members of this hon. House, so essentially it will be exact.
Mr. Speaker, Nalcor’s position, supported by MHI, is that wind is an important component in our Energy Plan, but at present only a small amount of wind can be integrated into the system as it exists. We cannot operate on wind only, even though we have the best wind in North America. Contrary to what the Member for St. Barbe said the other day, it only generates electricity 40 per cent of the time. Mr. Speaker, the development of the Maritime Link allows for the development of more wind to use as export.
We have a number of small hydro projects, Mr. Speaker, that amount to about seventy-seven megawatts of power. We have Round Pond with eighteen megawatts, Portland Creek with twenty-three megawatts, and Island Pond with thirty megawatts. It is MHI’s conclusion, in the PUB setting, that Nalcor’s estimate of the cost was reasonable, but the price would be more than what Nalcor has forecast.
Another issue or option being suggested, Mr. Speaker, is to recall power from Quebec. There is approximately 5,400 megawatts of power produced by the Upper Churchill. We receive two blocks of energy; one is what is referred to as the TwinCo block or 225 megawatts, which was a result of Twin Falls either closing down or being flooded and the power then being provided to IOC and Wabush Mines at a very low price, Mr. Speaker. Then we have a 300-megawatt recall block which goes to heat Labrador in the winter time where approximately 200 to 220 megawatts of energy is required. We can export excess power on the Quebec transmission lines where we have that 265 megawatt booking. We can export up to 265 megawatts, Mr. Speaker. That excess power was sold a couple of years ago in New Brunswick or it can be sold on the spot markets in New York or the North Eastern United States, Mr. Speaker, at prices that can range anywhere from $25 to $100 per megawatt hour.
The question then is: why don’t we recall more power? Mr. Speaker, in the mid-1980s one of the cases that went to the Supreme Court of Canada was the issue of whether or not, under the contract, we could access more power, the power contract, for our own use. However, the Supreme Court of Canada concluded that the law of the contract, the power contract, was governed by the law of Quebec, and also there was no demonstrated need for power at that time. 92A of the Constitution was subsequently enacted, Mr. Speaker, and we have obtained legal opinions from leading jurists that we can potentially recall the power constitutionally, but because the contract is governed by the law of Quebec, we would be subject to a breach of contract action in Quebec.
So, Mr. Speaker, there would be no economic advantage, we would be tied up in the courts for years, and that certainty we are looking for, in terms of being able to provide power to the island and to the companies in Labrador, would not be there. So, this issue has been explored.
Another issue is sourcing power from Quebec; why do we not buy power from Quebec? Well, let me tell you how this would work, Mr. Speaker. We sell power under the power contract to Quebec at $2.50 a megawatt hour, or a quarter cent power. So, we say to Quebec: Will you sell us power? Now, there are issues of transmission lines, but that same power that is produced in the Upper Churchill could be sold back to us for thirty to forty times what they paid for it. Now, is that the kind of contract that people want to enter into? Did we not do that once, Mr. Speaker, in 1969?
So, what we have to look at, we would still be potentially held captive by Quebec: subject to Quebec prices, subject to the whim of their political masters, and subject to Hydro-Québec. Now, Mr. Speaker, that is not the way to go, because they are going to sell at the best price they can get, and that would be, I would suggest to you, the cost of electricity at Holyrood. So we could be buying power from Quebec that is generated in Labrador. There is something immoral about that, but unfortunately, as the power contract currently exists, it is not illegal. We need power for the island, so we buy power back from Quebec, if we could; we would have to build our transmission lines anyway to get the power to the island. What you are running into, Mr. Speaker, is that same issue of building transmission lines if you need the power.
When you compare that option to Muskrat Falls, there is not that same price certainty over forty to fifty years. I will talk about prices next week, Mr. Speaker, and hopefully illustrate the potential impact for people, people every day who wonder: what is going to happen to my power rates? Well, hopefully I will be able to give some help next week.
To date, Mr. Speaker, we have supplied 100 per cent of the power that we need in this Province. We cannot afford to become dependent on a supply of energy from Hydro-Québec. So, Mr. Speaker, that is the issue of sourcing power from Quebec. It is just not feasible.
The PUB report, Mr. Speaker, there was more than $2 billion spent. What came out of this report, Mr. Speaker, is something I would suggest to you is very positive; nothing they said in the report, but what we have done as a government as a result of their failure to answer the question that was put to them. MHI has been hired by the government to review the Decision Gate 3 numbers. Mr. Speaker, they will outline the costs and the potential overruns. There will be more certainty to the process.
As I have indicated, Ziff Energy of Calgary has been retained to provide reports on natural gas. We will have a study prepared on wind, Mr. Speaker, or a report prepared on wind. There will be full debate in this House of Assembly and a vote on the project. There will be full discussion. These reports will be provided to the public and to the Opposition in plenty of time so there will be informed debate. Then there is still the issue of the loan guarantee that has to be finalized, the issue of the Emera agreement and, most importantly, we will have our final Decision Gate 3 numbers.
Mr. Speaker, over the last week we have heard the endorsement of the federal Leader of the NDP, Thomas Mulcair; very significantly his Quebec caucus is supporting Muskrat Falls. As my colleague pointed out last night, you do not support the loan guarantee unless you support the project. The Liberals accept, Mr. Speaker, that we need the power.
I want to refer you to a couple of comments of Jim Prentice, a former federal Environment Minister, in a speech he gave, Mr. Speaker, on April 27, 2012. Mr. Prentice stated: “First and foremost, I believe that Premier Dunderdale has charted a wise and entirely reasonable course of action.”
SOME HON. MEMBERS: Hear, hear!
MR. KENNEDY: Secondly, Mr. Speaker, Mr. Prentice described Muskrat Falls as “a transformational project for Atlantic Canada”.
SOME HON. MEMBERS: Hear, hear!
MR. KENNEDY: Very significantly, Mr. Speaker, he stated that Muskrat Falls is “a game-changing regional energy plan for the 21st century”.
SOME HON. MEMBERS: Hear, hear!
MR. KENNEDY: Mr. Speaker, I will end on those words. Next week I will be back for part three to talk about electricity rates and other aspects of Muskrat Falls.
Thank you, Mr. Speaker.
Muskrat Falls – Do We Need the Power
May 3, 2012
MR. SPEAKER: The hon. the Government House Leader.
SOME HON. MEMBERS: Hear, hear!
MR. KENNEDY: Thank you, Mr. Speaker.
Mr. Speaker, I am going to use my twenty minutes today to talk about the Muskrat Falls Project. This project was announced in November 2010. Since the announcement, there has been much ongoing debate and criticism about the project and opponents of the project have been very vocal. The debate has been sustained, it has been extensive, and I can say it is something that we welcome. What we want to do as a government is make the decision that is in the best interests of the people of Newfoundland and Labrador. I can say that a lot of the criticism is unfounded and simply confuses the issues.
Mr. Speaker, over the next few weeks in the House of Assembly, I am going to have the opportunity to speak on three separate occasions. I am going to use those opportunities in twenty-minute segments to talk about various aspects of the Muskrat Falls Project. I will outline the facts and figures as we know them, Mr. Speaker, recognizing that the figures could change as we get the Decision Gate 3 numbers which are expected around the middle of July. They will be the final numbers that Nalcor will provide.
Decision Gate 3 numbers, Mr. Speaker, will be reviewed by Manitoba Hydro International and they will be released to the public and available for debate in this hon. House. I am going to review issues such as the demand for power, the options or alternatives that are available, projected electricity rates, economic benefits, environmental benefits, and potential use of the power. I will attempt to answer some of the Muskrat Falls critics.
One of the things I am going to try to do, Mr. Speaker, is keep it simple because, as a lawyer, one of the tricks I would use – and I am not going to say I would use it in trying to create reasonable doubt, but one of the tricks I would use to confuse the issues, sometimes you can argue there is a doubt inherent in the confusion. So I am going to try to simplify, Mr. Speaker, and try to ensure that the people of this Province understand that this project will only be sanctioned if it is in their best interests.
In making a decision on sanction, Mr. Speaker, we are going to be guided by one basic principle: Is Muskrat Falls in the best interest of the people of Newfoundland and Labrador? On numerous occasions, I have stated that the decision whether or not to sanction or to proceed with the development of Muskrat Falls can really be boiled down to two simple questions: Do we need the power, and if so, what is the least-cost alternative? What is the lowest-cost way to get that power, Mr. Speaker?
Nalcor’s position that we need the power has been supported, Mr. Speaker, by Manitoba Hydro International when they were hired by the Public Utilities Board. Manitoba Hydro International is an independent consultant. They were hired, as I have indicated, by the PUB, and they now have been retained by our government to review the Decision Gate 3 numbers when they come in from Nalcor. They concluded that not only did we need the power, but Nalcor underestimated the need for power. They did not take into account at all the potential $10 billion to $15 billion worth of mining developments in Labrador, all of which need substantial amounts of power.
Mr. Speaker, as I have indicated, I have three segments. Today I am going to talk about the need for power. Next week I will talk about the options or alternatives. In the third week, Mr. Speaker, I will talk about such issues as the electricity rates. Really, that is what the average person is most concerned about: How will Muskrat Falls impact my rates? Part of what I have to do, or what we have to do as a government, is demonstrate that Muskrat Falls will stabilize then reduce rates because of, as I will get to in second, the rising price of oil.
Mr. Speaker, the Island generating system has a total capacity of 1,958 megawatts of power, with Newfoundland and Labrador Hydro providing 1,518 megawatts of that power. The important point is that Holyrood has the capacity to generate 466 megawatts, or 31 per cent of the power needs for the Province. Mr. Speaker, critics have argued that, with the mill closures in Stephenville and Grand Falls and with the decline in population, the power is not needed, because we have more power into the grid as a result of the mill closures.
Mr. Speaker, a couple of interesting statistics on that actually run contrary to that argument. We currently have 230,000 ratepayers in the Province, people who use electricity and pay bills for their electricity. That is 17,000 new ratepayers since 2005. If you think about it, Mr. Speaker, the answer is fairly simple. Again, it is common sense proposition. We no longer have, or generally we do not have, eight and ten people living in a house. We have smaller families. We have young people moving into homes at a younger age, because that is one of the first things that people want to do. That is their goal in life, as they get married and have a family, or they go to work – to own their home. We actually have more ratepayers because there are more people in their own homes with less numbers in the family, and also – and again, it is quite interesting – a lot of people in the age bracket of twenty-five to thirty-five, for the reasons that I talked about earlier.
So, we have more ratepayers, 17,000 new ratepayers since 2005. What we have to do, Mr. Speaker, as a government, and Nalcor, is plan for future electricity needs. We have to look into a crystal ball, and with that looking into the crystal ball, there are always risks and uncertainties. Any time you are trying to predict what happens in the future, Mr. Speaker, there will be inherent risks, just as there are inherent risks with Muskrat Falls and uncertainties. There are inherent risks and uncertainties with refurbishing Holyrood, with natural gas, and these are issues that I will touch on as I move along.
What we are trying to do as a government is to develop and to ensure that Newfoundlanders and Labradorians have access to reliable, affordable electricity.
I have not looked at these statistics in a while, a couple of months, but I will update them before I speak to this next week or the week after. Residents of Newfoundland and Labrador are currently at the fourth or fifth lowest in the country in terms of electricity rates, with Labrador being the cheapest rates in Canada. Mr. Speaker, part of the reason for that is the provinces who have cheaper rates are Manitoba, Quebec, and BC, all of which have large hydro.
Mr. Speaker, what we are trying to do is ensure how we deal with the issues that we have before us. Growth is projected again. It is common sense. Growth is projected in the domestic, commercial, and industrial use of electricity on the Island, and I have not even talked about Labrador yet. Domestic use, Mr. Speaker, mainly due to electric heat, is the principal driver of new demand. I talked about those 17,000 new ratepayers and I will talk in a second about the increase in homes, but 86 per cent of new homes use electric heat. Again, we have that domestic use and the need for residential power.
Also, as you look especially in our growth centres you will see that there are significant commercial developments.
There is currently, Mr. Speaker, as you drive towards my district in Carbonear – Harbour Grace a development in the Town of Spaniard’s Bay which is taking place. I understand there are developments in Conception Bay South; we have Stavanger, we have Kelsey Drive. I think I just read yesterday there is a new Kent going to Central Newfoundland and Labrador.
AN HON. MEMBER: Grand Falls-Windsor.
MR. KENNEDY: Grand Falls was it? Yes.
What we are seeing, Mr. Speaker, is continued commercial growth. Mr. Speaker, this is actually a very good statistic. I remember when I was in Finance, we did not really talk much about the gross domestic product. The GDP, when you have an export-based economy, can go up and down so much in a small economy that we looked at economic indicators such as housing starts. That is what gives you a picture, Mr. Speaker. You look at population increases, you look at car sales.
We are averaging in this Province, Mr. Speaker, 3,200 housing starts each year, over the past five years; 81 per cent of which were single-detached homes and 86 per cent of them using electric heat. Mr. Speaker, we have seen an increase in our population. Last year, I think the last census showed 1.8 per cent but there were some startling statistics in there, Mr. Speaker. Paradise was something like 40 per cent. I think Conception Bay South was 20 per cent; Gander I think was 11 per cent. What we saw were good, steady increases in our population with a lot of our other communities, Mr. Speaker, remaining stable.
That growth increase in the population of 1.8 per cent shows that our population is increasing, Mr. Speaker, and I expect that we will continue to see it increase. If you think of why our population declined, it is quite simple, people moved away and also we had smaller families. Mr. Speaker, the largest family among my friends today is four or five. Two or three children is usually a handful. We are not seeing the nine children like there were in my family growing up, and that was a small family on my road, in London Road in Carbonear, Mr. Speaker. So we are seeing smaller families.
We have the economic growth; we have the commercial and industrial growth. Mr. Speaker, the power that went into the grid with the closure of the mills has been used up. That explains why Holyrood was only functioning at 15 per cent to 25 per cent over the last number of years. When Holyrood gets to its full rate of capacity, Mr. Speaker, it burns 18,000 barrels of oil a day. Holyrood is used at its full rate of capacity in the wintertime. That is when we need the energy in this Province.
In Toronto, for example, and in Boston, they not only need energy in the wintertime, but they need it in the summer because of the air conditioners. Now, Mr. Speaker, air conditioning, I put it on in my car, there are a couple of times a year you are guaranteed to use it, but I think you can be safe to buy a car in our Province without air conditioning. These big apartment buildings, the big buildings need a lot of energy, Mr. Speaker.
Now, let’s talk about Holyrood. We know that as we increase in our residential, commercial and industrial use, Holyrood will have to be used more; 18,000 barrels of oil a day, Mr. Speaker. My colleague and friend, the Minister of Finance watches the price of that barrel of oil every day. Both myself and the minister, and myself and the Premier, met with a group out of New York called PIRA, a leading international forecaster in oil, Mr. Speaker. I can remember us saying to Dr. Mark Schwartz: Explain to us in simple terms why you think the price of oil will continue to rise? It is very simple. It is so simple, Mr. Speaker, that I will go through it. Again, it is common sense.
First and foremost, Mr. Speaker, there is not enough oil to meet the world’s demand. So it is a question of supply and demand. The Arabs guard very closely their reserves and how much they have, but the world currently burns about 90 million barrels of oil a day – 89 million, I think it is. The Americans currently lead the way, Mr. Speaker, but what Dr. Schwartz told us is that in the next number of years, with the growth in China, they will lead the way in terms of the use of oil. That continued growth in China is going to go from the 9 per cent or 10 per cent down to 5 per cent, perhaps, but 5 per cent growth is absolutely phenomenal in a country that size.
Recently, some of my officials had a map put on the wall of China because there is a lot of mining in China. The demand for steel is what is making the iron ore industry run in Labrador right now. Mr. Speaker, they have cities – and I forget how many cities – in China that have a bigger population than our country as a whole. I think there are three or four of them now with 20 million people in a city. China continues to grow.
Again, Dr. Schwartz was very practical; he talked about the geopolitical element of the pricing of oil. The activities in the Middle East, the Arab spring affects the price of oil. He indicated, Mr. Speaker, and they are doing this based on something they have been doing for a lot years, that every two or three years there will be an activity in the Middle East, whether it be the Iraq War, the activities in Iran, or whether it be the Arab spring that will result in the price of oil going up because the supply is affected.
Mr. Speaker, he also told us that the global middle class is growing by 80 million people a year; again, mostly in India and China. So what we are seeing, Mr. Speaker, is a world economy in the BRIC countries that is absolutely amazing. The price of oil, based on what they are telling us, will go up.
For those who are interested, Mr. Speaker, for any of our viewers who are interested, PIRA was retained by the government, by our department, to file a report before the PUB, and that report can be accessed on-line. Dr. Schwartz also addressed, in that report, the issue of shale oil. I think he predicted that shale oil could go up to producing a million barrels of oil a day, but that is not enough to offset the demand. So, Mr. Speaker, what Nalcor has said is that by 2015 we will start to experience blackouts; by 2020, we will have an energy deficit. Quite simply, we will not have enough energy unless we do something.
Mr. Speaker, to put things in perspective, one of these iron ore mines in Labrador could use – not IOC, because they are bigger – 100 megawatts of energy. If Vale Inco were to go underground in Voisey’s Bay, they would need 50 megawatts of energy. The same thing if there was uranium mining, I understand. An aluminum smelter could require anywhere from 400 to 800 megawatts of energy. Vale Inco, Mr. Speaker, in Long Harbour, will require 80 megawatts of energy and will be the single largest consumer of electricity from Newfoundland and Labrador Hydro, and will rival the other three existing island industrials combined: Teck, North Atlantic, and Corner Brook Pulp and Paper.
Mr. Speaker, two-thirds of the firm capacity of Muskrat Falls, after transmission losses, will be required to replace Holyrood. I will talk a little later on, perhaps in part three, about the environmental impacts; but, for those who live in Holyrood, this is a huge issue. If you talk to my colleague, the Minister of Transportation, we are talking about our children’s future, Mr. Speaker, not only in providing a secure financial future but providing a secure environmental future. Holyrood serves –
SOME HON. MEMBERS: Hear, hear!
MR. KENNEDY: Replacing Holyrood gets us off the dependence of oil and volatility of oil. To tell you how simple Dr. Schwartz’s outline is; it was actually accepted by Randy Simms in the Evening Telegram – or whatever they call that paper these days – this weekend. Do you know what? He read it in Maclean’s. Now, we can go to our experts. We can go to Wood Mackenzie and we can go to PIRA; but, when Randy Simms read it in Maclean’s, it has to be right. So, he wrote an article the weekend saying that he accepted it. Mr. Speaker, MHI’s report confirmed Nalcor’s position that we need the power.
Now, we have not even talked about Labrador. Some of the comments made by the Opposition House Leader, I will save for another time. I want to address some of the comments she made the other day about Labrador because this government, at least since I have been the Minister of Natural Resources, we have maintained that – and I have Hansard from last spring where the Premier said we will have 40 per cent to satisfy the Island needs, 20 per cent for the link, which we will own after thirty-five years, which gives us access and removes our dependence on Quebec. It breaks that geographical stranglehold of Quebec. I do not have time today to address Ed Hollett’s theory that we can send all our power through Quebec and get it back through Quebec, because that is just wrong.
Mr. Speaker, we have $10 billion to $15 billion in mine developments. I have met with IOC, Tata Steel, Alderon Resources, Labrador Iron Sands, Labrador Iron Mines, and Vale Inco; they all need power. They are saying to us: Where can we get the power? They want the power at industrial rates because industrial rates in Quebec and in Manitoba, you have to be competitive. So, we are still in the process of determining what those rates will be.
Mr. Speaker, we have indicated and we have maintained that 40 per cent of that power will be put on the spot markets. The spot markets, Mr. Speaker, as I indicated yesterday and I think the way it was explained to us they can change by the hour. I do not know all the technicalities, but it goes in through New York and basically it is a distributing centre. The price can change from $40 at one point in the day to $100 per megawatt hour later in the day. We are not going to sign firm contracts. We do not want firm contracts. Again, Mr. Speaker, there is one place in this country that wants firm contracts, and that is Ontario. Hopefully, the day will come when we move Gull Island power through Quebec to Ontario. They are relying on nuclear generators right now in Ontario. So, there is a market. That power then can be recalled.
Mr. Speaker, it is clear, and most people agree – I have heard the Leader of the Official Opposition agree. I still do not know what the NDP position is, so all I can say is I have heard the Leader of the Official Opposition agree that we need the power.
Mr. Speaker, if we need the power the next question is: Well, what are we going to do about it? If we need power by 2020, it takes five to six years whether you are going to build Muskrat Falls – I do not know how long it takes to build a liquefied natural gas terminal; we will find that out in the very near future, Mr. Speaker. What are we going to do? Are we going to sit here and do nothing? Mr. Speaker, sometimes the easiest thing for a government to do is to do nothing. It is too much pressure on us, let’s back away, and leave the problem for someone else. Mr. Speaker, that is not the way this Premier operates, and that is not the way this government operates.
SOME HON. MEMBERS: Hear, hear!
MR. KENNEDY: We have a vision for the future of our children and the future of our Province, Mr. Speaker. That is what this government is committed to; having said that, we are not committed to it at all costs. That is why we will provide all of the numbers, we will provide a report on natural gas, we will provide a report on wind, and we look forward to debate in this hon. House, Mr. Speaker, where the people who are elected by the people have their say.
Thank you very much, Mr. Speaker.
SOME HON. MEMBERS: Hear, hear!