Wednesday, December 10, 2014

On the North Spur

I have just received a response to my access to information request concerning the North Spur stabilisation plan. The response to my request can be found here and here.

The North Spur is a ridge that acts as a natural dam on the Churchill river and is an integral part of the Muskrat Falls project. The North Spur contains sensitive clay that can liquify under stress and cause landslides. Some have alleged that Nalcor has not done enough to ensure the stability of the North Spur, with potentially catastrophic consequences.

An expert on quick clay landslides, Dr. Stig Bernander, recently gave two lectures in St. John's outlining what he considers to be deficiencies in Nalcor's analysis of the North Spur stabilisation plan. In particular, he argued that a method of analysis that he developed for assessing the risk of "downhill progressive failure" ought to be performed.

I attended both of Bernander's lectures and found them quite interesting, but also frustrating. Frustrating because Bernander based his criticisms solely on publicly available documents and appears not to have sought additional clarification from Nalcor. Frustrating also because Nalcor has chosen not to respond to Bernander's allegations by releasing the relevant documents.

After Bernander's lectures, I submitted an access to information request to Nalcor for documents I hoped would clear up the matter. Specifically I asked for:
The review of "geotechnical assessments and dynamic studies" of the North Spur stabilization project by Dr. Serge Leroueil. This review is referred to by the Independent Engineer in the "Lower Churchill Project Site Visit Report" dated October 20, 2014.
Dr. Leroueil is an internationally renowned expert on sensitive soils and was specifically recognised as such by Dr. Bernander during his lecture. The response to my request can be found here and here.

To summarise: I received two (minimally redacted) letters signed by Leroueil and addressed to the lead geotechnical engineer for the project, M. Regis Bouchard. The first letter, dated August 24th 2014, is a review of an engineering report on the North Spur Stabilization Works. Leroueil considered that report to be satisfactory. The key excerpt is the following:
... I would add that the stabilization works increase the factor of safety from about 1.0 to about 1.6, which is very significant. Also, by doing that the maximum shear stresses in the soil mass have been significantly reduced, eliminating the possibility of progressive failure in the sensitive clays.
The second letter, dated October 26th 2014, is written in French in a more informal tone, and deals specifically with kind of analysis Bernander insists should be performed. I am a bit less confident in my interpretation of this letter (partly because it is in French, partly because it deals with technical engineering issues), but Leroueil seems to argue that Bernander's method of analysis would be difficult to interpret and is unnecessary.

On the other hand, the letter does confirm some points raised by Bernander in his lecture: that there is no established method for assessing stability against "downhill progressive failure" and that Bernander's preferred method of analysis has not been performed. 

Here is my effort at translating the relevant parts of the second letter. The last sentence of point 2. seems out of place - I wonder if he meant to write 'top of the slope' rather than 'foot of the slope'. 

Concerning the North Spur, my opinion is the following. 
There is no established methodology for assessing stability against "downhill progressive failure". Bernander offers a very artisanal methodology that, to my knowledge, has only been used for the analysis of existing fractures, for which the results were known in advance. Ariane Locat has adapted this method for "uphill progressive failures" which has been used to understand two spreads in sensitive clays. In my view, starting to do these calculations will lead to lots of pitfalls and questions. 
On the other hand, the method of analysis consists of defining the initial shear stress along a potential failure surface, probably approximately horizontal and passing through the foot of the slope in our case. This shear stress is maximum at virtually the crest of the slope. If a disturbance increases the shear stress in some location up to the shear strength of the soil, then a progressive failure can begin and eventually lead to a global rupture. There are two important things in what I just said : 
1. The initial shear stress. If you show that you have improved the stability of the slope (higher F), it means that you have reduced your initial shear stress and you move away from the shear strength of the soil. 
2. Disturbance that can locally increase the shear stress. This disturbance may come from the bottom or top. In Quebec, the disturbance is usually an erosion or a small break at the foot of the slope. But as you have protected your foot slope, you have removed the possibility of  disturbance at the foot of the slope. The disturbance may also come from the top, like the pile shaft sinking in the case of Surte studied by Bernander. And there, it must be shown that you have taken all precautions to prevent all disruption at the foot of the slope. 
If you improve your stability, thus reducing the possibility of progressive failure compared to what it was, and if you prevent any disturbance, you can not have progressive failure. I think this is how one must address the problem.

Monday, July 28, 2014

An $8 increase? Try $27.

The good news: Nalcor finally came through with some concrete numbers on the new rate projection.

 The bad news: they are worse than previously reported.

Here is the updated rate projections sent to me by a Nalcor representative (a member of the Nalcor "social media team").

Click image to embiggen

This table shows that the new projections are 0.5 cents higher than DG3 in 2018 and 1.8 cents higher in 2030.  This increases the projected average monthly consumer bill by $8 in 2018 rising to $27 in 2030.

Caution is always warranted when comparing dollar values across time.  However I believe this comparison is valid for the following reasons. (Update:  I have now received confirmation from Nalcor that both projections are in nominal prices and thus are directly comparable. The argument appearing in italics below is no longer important.)

1) In my email to Nalcor (reproduced below) I specifically asked to be provided with updated projections that were directly comparable to the DG3 estimates. The table I was sent is also presented in a way that suggests the numbers are meant to be compared.

2) If we assume that the June 2014 projection is not corrected for inflation but the DG3 figures are, then the table above would say that the new projection is lower in real terms than the DG3 figure, which doesn't make any sense.

3) The table explains the on-first-hearing-nonsensical remarks made by Ed Martin at the press conference when the new cost estimates were released: 

"When Muskrat Falls comes into service that's (a monthly power bill increase of) on average about 8 dollar per month to maybe as high as 28 dollars per month - depending on your usage factor - over what was projected at sanction for monthly electricity rates. Once again that depends - the range depends on how much electricity the person uses."

I believe that Martin explained this incorrectly. It does not make sense to offer such a wide range as an average,  but it does make sense to say that the average bill increase varies between $8 and $28 over the projected time period. This interpretation is in keeping with Martin's letter to the Telegram which (misleadingly) only offers a direct comparison to DG3 for 2018.

Press reports from the CBC (here and here) only provide the $8 figure and the Telegram report does not include any rate projection so this story has not been properly explained to the public.

It is interesting to compare the new projections with the DG3 projections for the isolated island option.

Click image to embiggen

The DG3 Isolated Electricity Rate is now lower than the new Interconnected Rate until 2025, after which it is higher.  Muskrat Falls is no longer a clear winner over this time frame, though it probably remains the cheaper option post-2030.

Email exchange reproduced below:

Sent: July 22 


I understand that a response to my earlier question is under preparation.  Here is the question for your convenience:

"I understand that Nalcor is estimating that the new cost estimates will
result in a $8 higher monthly power bill for the "average" customer.  I
would like to see the analysis that derived the $8 figure from the new
cost estimates.  Is that possible?"

Since posing this question there have been some other public statements from Nalcor that have sown confusion among the public. A good example is Ed Martin's letter to the Telegram that was not careful to explain he is using nominal price estimates.  This led to a blog post by Des Sullivan [note: actually written by JM] that has further muddied the waters:

I think it would be a big help if - in addition to answering the question above -  Nalcor released an update of estimated electricity rates in a form directly comparable to this chart:

thank you,

Tom Baird"

Recieved: July 28 

" Thank you Mr. Baird for another question. 

As requested, we've updated the Electricity Rates and Average Monthly Island Residential information based on the revised capital cost update for the Muskrat Falls Project that was released in June 2014. 

In our reply to your previous question on July 24, 2014, we noted that forecast electricity bills include all costs of generation, transmission, distribution, capital, operating, maintenance and sustaining capital, including fuel, interest and financing costs, plus Newfoundland Power costs.  All of these items are included in the projected rates. Prior to interconnection Newfoundland and Labrador Hydro anticipates significant capital expenditures to address load growth including a new gas turbine in 2014 and a new transmission line from Bay d'Espoir to Western Avalon in 2017. 

The rate projection information below is from 2018 (year Muskrat Falls Project will be included in island electricity rates) to 2030. The information that was prepared in October 2012 at Decision Gate 3 used 2017 as a starting reference point for Muskrat Falls. The information at Decision Gate 3 also included rate projections for the Isolated Island option. Since the Muskrat Falls Project (Interconnected Island) was sanction in December 2012 there is no longer an Isolated Island option for 2018 and beyond as the system will be interconnected with power from Muskrat Falls. 

At the time of the release of the capital cost update for the Muskrat Falls Project at the end of June 2014, Nalcor stated that the change in the electricity rates are expected to be in the range of about 7% to the average homeowner on the island using electric heat. This is for the 10-year period from 2014 to 2023. It is anticipated that when Muskrat Falls is fully operational and our province is powered almost exclusively by renewable energy sources, rates will stabilize for customers, increasing on average around one to two per cent per year. 

Attached is the updated chart as requested. 

This response will also be posted on the Muskrat Fall Project website shortly. 

(name omitted) "

Thursday, July 24, 2014

Response from Nalcor

18 days ago I wrote to Nalcor with this question:
"I understand that Nalcor is estimating that the new cost estimates will result in a $8 higher monthly power bill for the "average" customer.  I would like to see the analysis that derived the $8 figure from the new cost estimates.  Is that possible?"
I received the following reply today.

The email is a bit short on details. I would have liked to see how the burden is spread between residential users vs. industrial users, what the projected customer rate is in future years, and how the various parameters (projected fuel cost, interest rates, etc.) have changed since DG3. I think this email clarifies matters a little bit though.

One interesting observation:  they seem to assume that the higher price will have no effect on average consumption. Do they take price elasticity into account in their long term forecasts?

Friday, May 30, 2014

On the social position of beggars

An excerpt from George Orwell's "Down and Out in Paris and London".

It is worth saying something about the social position of beggars, for when one has consorted with them, and found that they are ordinary human beings, one cannot help being struck by the curious attitude that society takes towards them. People seem to feel that there is some essential difference between beggars and ordinary 'working' men. They are a race apart--outcasts, like criminals and prostitutes. Working men 'work', beggars do not 'work'; they are parasites, worthless in their very nature. It is taken for granted that a beggar does not 'earn' his living, as a bricklayer or a literary critic 'earns' his. He is a mere social excrescence, tolerated because we live in a humane age, but essentially despicable. 
Yet if one looks closely one sees that there is no essential difference between a beggar's livelihood and that of numberless respectable people. Beggars do not work, it is said; but, then, what is work? A navvy works by swinging a pick. An accountant works by adding up figures. A beggar works by standing out of doors in all weathers and getting varicose veins, chronic bronchitis, etc. It is a trade like any other; quite useless, of course--but, then, many reputable trades are quite useless. And as a social type a beggar compares well with scores of others. He is honest compared with the sellers of most patent medicines, high-minded compared with a Sunday newspaper proprietor, amiable compared with a hire-purchase tout--in short, a parasite, but a fairly harmless parasite. He seldom extracts more than a bare living from the community, and, what should justify him according to our ethical ideas, he pays for it over and over in suffering. I do not think there is anything about a beggar that sets him in a different class from other people, or gives most modern men the right to despise him. 
Then the question arises, Why are beggars despised?--for they are despised, universally. I believe it is for the simple reason that they fail to earn a decent living. In practice nobody cares whether work is useful or useless, productive or parasitic; the sole thing demanded is that it shall be profitable. In all the modern talk about energy, efficiency, social service and the rest of it, what meaning is there except 'Get money, get it legally, and get a lot of it'? Money has become the grand test of virtue. By this test beggars fail, and for this they are despised. If one could earn even ten pounds a week at begging, it would become a respectable profession immediately. A beggar, looked at realistically, is simply a businessman, getting his living, like other businessmen, in the way that comes to hand. He has not, more than most modern people, sold his honour; he has merely made the mistake of choosing a trade at which it is impossible to grow rich.

Tuesday, May 13, 2014

Some documents relating to the Humber Valley Paving scandal

I have collected below some documents related to the Humber Valley Paving scandal for the convenience of those following the controversy.

Updated:  An ATIPP request outlining communications between Gene Coleman and Nick McGrath around the time of the deal.

The paving contract. (pdf)

The bond contracts and tender book. (pdf)  One tidbit that hasn't been reported in the media is that the bonding company was the Guarantee Company of North America.

The letter from Transportation and Works  (T&W) releasing HVP from the bonds. (pdf)

A list of all tenders since 1996 that were awarded to HVP. (link)

Here is a email sent to me from the director of comms at T&W in response to my request for all information sent to the Telegram about HVP in recent weeks.


Attached/enclosed is the requested information.

1) History of Relationship with Humber Valley Paving
The Department of Transportation and Works has had a long-standing relationship with Humber Valley Paving that dates back to 1996. In 2007, the company changed ownership and was purchased by a number of investors, which included Mr. Frank Coleman.  It is our understanding that Mr. Coleman has recently sold his shares and is no longer a shareholder.

Attached is a complete listing of all projects where Humber Valley Paving was the successful proponent.  In all cases a public tendering process was used and the company was the lowest compliant bidder.

For your reference, there has been approximately $1.2 billion invested in highway/road improvement initiatives since 2007.

2) Background Information
Enclosed is additional information on the scope of work completed by Humber Valley Paving, as well as background information on the bond.

Under the contract to construct and pave 80 kilometers of highway between Happy Valley-Goose Bay and Churchill Falls, 60 per cent of the work was completed.  The company was only paid for the work completed.  They were not paid for work remaining to be done.

Included in the $11.8 million paid to Humber Valley Paving is the following:
- 106,000 tonnes of “Class A” gravel out of a total of 146,000 tonnes
- 30,000 tonnes of “Class  A” was manufactured and ready to place
- 444,000 tonnes of “Class B” gravel out of a total of 508,000 tonnes
- 40,000 tonnes of “Class B” was manufactured and ready to place
- 15,900 tonnes of asphalt out of a total of 73,700 tonnes
- 935 tonnes of liquid asphalt out of a total of 4500 tonnes
- 3500 meters of guide rail, which exceeded the estimated 3300 meters
- 5,000 flag person hours out of a total of 10,000 hours
- 12,800 meters of guide rail adjustment out of 14,000 meters


There was no money to refund.   Bonds are in essence an insurance policy and are called when a contractor fails to meet the requirements of the contract – most often due to a bankruptcy.  In order to call on a bond, the contractor would have to be declared in default of the contract. That said, there is no guarantee that the Provincial Government would recover the entire amount of the bonds that are in place.  Also, the Provincial Government is still responsible for all costs up to the value of the original contract.

The Provincial Government could have called the bonds.  If we had, project timelines and the viability of the company may have been jeopardized.  It would have also likely led to the loss of direct and indirect jobs and potentially contribute to weakening industry and taking a competitor out of the provincial marketplace.

Instead, the Provincial Government opted to relieve Humber Valley Paving of its remaining obligations and re-tender the work as part of another major tender involving 80 kilometers of paving between Happy Valley-Goose Bay and Cartwright Junction.  By taking this approach, we are ensuring a competitive bid process and the project being completed on time and on budget.

The original tender scheduled for the completion of this road work for July 31, 2014 and that target is now August 31, 2014.


Tuesday, May 6, 2014

HVP deal may have violated the Lobbyist Registration Act

Brad Cabana made an important observation on Twitter today.  It appears that Gene Coleman and Nick McGrath were in violation of the "Lobbyist Registration Act" when the controversial deal with Humber Valley Paving was being negotiated.  Here are the relevant parts of the Act:

 2. (c) (xvi) In this Act, "lobby " means to communicate with a public-office holder for remuneration or other gain, reward or benefit, in an attempt to influence public-office holders relating to the terms of a contract, the choice of a contractor, or the administration, implementation or enforcement of a contract.

2. (f) (i) "public-office holder" includes a member or an officer of the House of Assembly
6. (1)  In this section, 
(a)  "employee " includes an officer who is compensated for the performance of his or her duties; 
(b)  "in-house lobbyist" means a person who is employed by an organization   
(ii)  a part of whose duties as an employee is to lobby on behalf of that organization if the employee's duties to lobby together with the duties of other employees to lobby would constitute 20 % of time at work of one full time employee, assessed in a 3 month period, were those duties to lobby to be performed by only one employee; 
19. A consultant lobbyist or in-house lobbyist shall not lobby a public-office holder unless that person is registered in the registry of lobbyists with respect to those lobbying activities. 

Since McGrath has publicly admitted to verbally discussing the termination of the contract with Coleman, this clearly fits the definition of "lobbying".  I guess it is possible that HVP does so little lobbying that it wouldn't count as 20% of the time of one employee, but that seems unlikely.  I have not been able to check the registry of lobbyists myself (my browser is incompatible) but I am told that Coleman does not appear.

Here are the penalties.  It looks as though HVP might be forced to pay their bond penalty after all (see (6)).
31.  (1)  Every person who fails to comply with a provision of this Act is guilty of an offence. 
(5)  A person who is guilty of an offence under this section is liable on summary conviction, for a first offence, to a fine of not more than $25,000 and, for a second or subsequent offence, to a fine of not more than $100,000. 
(6)  In addition to the penalty referred to in subsection (5), the court may, where a person is guilty of an offence under this section, confiscate the proceeds of lobbying which were improperly obtained and direct that those proceeds be paid into the Consolidated Revenue Fund.

Friday, May 2, 2014

The Frank Coleman/Humber Valley Paving scandal - a timeline of events.

A few days ago, Peter Cowan of CBC broke a story about how Humber Valley Paving - a company closely linked to future Premier Frank Coleman - was allowed to cancel a multi-million dollar contract to pave a section of the Trans-Labrador Highway without paying any penalty.  I have prepared below a timeline of events linked to this story. We will continue to update as more details of this story emerge.

January 22: Dunderdale steps down as Premier.

February 10: Danny Williams publicly opposes Bill Barry for PC leader and mischaracterises the contents of letter Barry sent to caucus. (link).

February 14: Rumours circulate that Coleman is being courted by Williams to become PC leader. (link)

February 14: Coleman sells HVP, steps down as CEO (link, link).

March 10: Coleman steps down as a director of HVP (link).

March 13: HVP requests the termination of a $19M paving contract in Labrador (link).  ( it has now emerged that Gene Coleman - Frank's son - negotiated the deal, and that negotiations were done verbally and left no paper trail.  (link, link)).  This appears to be in violation of the Lobbyist Registration Act

March 13 evening (the same day!): Coleman announces he will enter the PC leadership race. Shortly after this announcement, both Steve Kent and Shawn Skinner announce they will not run.  (link)

March 14 noon: Nominations close for PC leadership race. Commentators widely agree that Coleman is almost certain to win the leadership and hence to become the next Premier.

March 21: The request to cancel the contract is granted. HVP gets paid $12M for road preparations and paving only 20km out of the 80km of what was required and have both their $9.5M performance bond and $9.5M labour/materials bond returned without any penalty. At this time three members of Coleman family, including his son Gene, were directors of the company and had an ownership stake in the company. (link, link). It was later revealed the Frank Coleman would have been personally liable to the bonding agency if the bonds had been pulled (link). This contradicts earlier statements by Coleman:

"No, I did not benefit personally from this whatsoever. It is incomprehensible to me that somebody could infer that I benefitted personally from this."(link)

April 20:  The 30 day period for sub-contractors to file a "mechanics lien" against HVP expires. Sub-contractors owed money who failed to file a lien will henceforth be forced to sue HVP in court. (link)

April 25: HVP shareholders release letter saying that "Mr. Frank Coleman and/ or members of his immediate family have no further interest in the ownership structure of Humber Group." (link)

As of April 31: Frank's relatives (grand children, nephews?), Michael and Robert Coleman are the sole directors of HVP. His son, Gene Coleman, is rumoured to have stepped down on April 28th. (link)

June 11: McGrath holds a press conference announcing the result of the retendering of the HVP contract.  McGrath claims that accounting for changes in project specs, cost to the taxpayers have risen by $1.5M. Ignoring specs, the cost has risen more than $2.5M. (link)

June 16: Frank Coleman quits the leadership "race" due to unspecified family issues. (link)

Sunday, March 2, 2014

A walking trail for Margaret's Place

Margaret's Place has emerged as a high density residential area; over a hundred condo units and dozens of row houses have been built on this central cul-de-sac in recent years, with another 44 unit condo in the works for Fall 2014. 

City councillors interested in improving walkability in the city should consider putting one or two short walking trails between Margaret's Place and Bonaventure Avenue.  I've indicated two possible routes below.

This would link these units directly the neighbourhood schools (Holy Heart, Brother Rice, Bonaventure), and the number 15 bus route leading to MUN/HSC and Quidi Vidi. It would also connect with an existing trail system leading to Churchill Square and provide a pedestrian short cut between Georgetown and Rabbittown.

These routes are already being used by walkers, even though this means clambering over snowbanks. Here are a few pictures of what pedestrians have to contend with to use these shortcuts.

Wednesday, February 12, 2014

Population projections

Population growth projections have recently emerged as a controversy. The Conference Board of Canada released a projection that the population of the province will drop to 482,000 in 2035.  Danny Williams declared the projection "bullshit" and city councillor Tom Hann also voiced criticism.

For fun, I decided to do my own projections using a very simple model under a few different scenarios.  In the models below, I assume:
  1. Every person dies on their 80th birthday.*
  2. There is an equal number of males and females in each age group.
* To be consistent I ignore everyone currently over 80 years old, so my population in 2013 is 507,000 instead of the actual 527,000.  This makes no difference to the projections, because 80 year olds don't have children.

Here is the chart.  The scenarios are explained below.