Slow response on Labrador power line risking investment

Ashley
Ashley Fitzpatrick
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No explanation from government on why power line decision yet to be made

As Alderon Iron Ore’s executive chairman says, “everyone and their brother in Labrador West” has issued a letter of support for building a new, main power line from Churchill Falls to the resource-rich mining region.

Yet Mark Morabito, along with those public supporters, the rest of Alderon’s senior management, its international partners, investors and potential contractors continue to wait for a decision from the provincial government on whether or not that line will be built.

The power line is required to feed Alderon’s proposed Kami iron ore mine, but would also allow for expansion at IOC’s operations and development of new mining projects in the area.

So far, the local board of trade, chamber of commerce, towns of Labrador City and Wabush, MP Yvonne Jones and the United Steelworkers — to name a few — have moved beyond letters to the Department of Natural Resources on the issue and have pushed their clear support to the media, in the hope of seeing a decision made.

When asked about the power line at the swearing in of interim premier Tom Marshall, on Friday, Jan. 24, Minister Derrick Dalley told reporters a decision was imminent and to be expected “in the next week or so.”

So far, no decision has been made.

Dalley is on the road this morning. The Telegram has requested comment on the topic, while a spokeswoman has suggested a decision on the line might not happen this week.

Meanwhile Alderon Iron Ore, the company hailed for drawing in millions and potentially billions in mining investment dollars to the province, putting forward a mining project promising at least 800 construction jobs and 500 full-time, long-term positions post-construction, remains hanging in the wind.

“We were working on it for over two years,” Morabito said of the power line.

“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.”

The company is now 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 between then and now.

“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 and 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.”

Alderon made the province and the public aware of its power need when it registered for environmental assessment on Oct. 14, 2011. A detailed environmental impact statement was filed a year later, on Oct. 1, 2012.

On the Environment minister’s desk since October, the Kami project was released from environmental assessment by the province on Jan. 10, 2014.

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, so long as the PC government commits to building the line.

The provincial government has the ability to OK the spending required for the power line without referring the issue to the Public Utilities Board (PUB).

Liberal leader Dwight Ball says he supports going that route at this point, given the Kami project timelines, leaving the PUB to set the rate for the company’s use of the new power asset.

The price-for-use set by the PUB will be in addition to the industrial power rate. The cost put onto the company by the PUB will help cover the cost of the power line’s construction.

The estimated cost of he line has been previously reported at about $300 million.

NDP leader Lorraine Michael wants to see the PUB given the time to review the proposal for the new line. When asked about the project being placed at risk in the case of any delay, she said the responsibility falls at the feet of the Dunderdale government for not moving on the issue sooner.

No issues have been raised in the federal environmental assessment of the project. A decision from the federal review is expected this month.

Morabito said the federal government has been helpful to the company’s work to date, particularly with the decision to support expansion of the Port of Sept-Iles.

Provincially, he said approval of the new power line would be an equivalent show of support.

“I would say the deputy minister, his bureaucrats and the minister himself are extremely well informed and they know the situation,” Morabito said.

He also acknowledged Alderon’s interests are not the only consideration for the provincial government when it comes to approving or not approving the power line, noting the minister is under no obligation to discuss other issues with Alderon.

As for those other issues holding up a decision — “we can only guess at what they are.”

 

More to come Tuesday, both at thetelegram.com and in the print and digital editions.

 

afitzpatrick@thetelegram.com

Organizations: Department of Natural, Public Utilities Board, Exxon

Geographic location: Labrador, Wabush, Alderon Iron Ore Port of Sept-Iles

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Comments

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Recent comments

  • HANK
    February 05, 2014 - 19:24

    The provincial parties are to interested in jumping the fences from one party to the other to deal with the power supply issue for labrador right now !

  • Omega
    February 04, 2014 - 11:16

    Oh you people... still back in the dark ages! Time to turn on the lights! This company wants to contribute 60 million towards the line. 800 hunderd good paying jobs at start up and 500 good paying jobs when completed. Do the math. How long before the government gets their money back? Not only Alderon needing the power!

  • Linda
    February 04, 2014 - 06:22

    Have to agree with John Smith, something isn't right about this picture. as for the power line, let that company pay for it. or just go away.

  • Angus
    February 04, 2014 - 02:22

    When the Upper Churchill deal was signed, the Twin Falls electricity generating station was mothballed as the Unknown river was diverted to run into the Smallwood Reservoir but the agreement reached with the development of the Upper Churchill was to maintain the Twin Falls facility in a state of readiness and to provide power to IOC at 0.4 cents a kilowatt far below what today's market price is. Now we are faced with subsidizing a transmission line from the Upper Churchill site to western Labrador to another company which talks in billions of dollars of investment but hasn't dug one spoonful of ore from the ground. Something is wrong here with this type of gun to your head negotiations where Alderon is practically threatening the provincial government if this power line isn't built.

  • John Smith
    February 03, 2014 - 14:41

    Something fishy about this character, and his Chinese buddies....If I was government I wouldn't be signing on to this deal without some scrutiny...let's see some investments on their part first...

    • Joanie Smith
      February 03, 2014 - 17:40

      your buddy is on the board of Alderon Mr. Smith. Nothing fishy there.