Hugo’s New Brunswick Legacy

I see Hugo Chavez passed away.  Someone, somewhere is concocting a conspiracy theory.  The Americans must have done it.

Anyway, I suspect most New Brunswickers have forgot about Hugo’s gift to New Brunswick back early in his reign.  He cancelled NB Power’s orimulsion contract – I think he preferred to sell the stuff to the Chinese – costing New Brunswickers ultimately hundreds of millions of dollars.  NB Power had to convert Colson Cove back to running on oil and the price spread between what we were going to pay for orimulsion versus regular oil was substantial.  Not sure if anyone ever really did an audit on this.  We ended up not needing Colson Cove very much and I seem to recall there was some kind of cash settlement with Venezuela.

In a bit of irony, a number of very talented Venezualan musicians have ended up in New Brunswick – many because of their dislike of Chavez.

I didn’t really know much about Hugo.  When I heard his family is supposedly worth $2 billion – at least they say old Castro didn’t stash the cash.  Of course, its those dastardly Americans telling us about the $2 billion so back to the conspiracy theories.

RIP Chavez.

12 thoughts on “Hugo’s New Brunswick Legacy

  1. Aha, you must be part of the conspiracy!

    Yes, I see that at least some New Brunswickers REALLY have forgotten about Chavez’s ‘gift’. There was NO contract, that has been established for years and was the main feature in virtually every newspaper article (a heckuva thing to miss). There was only a “memorandum of understanding” which, according to ‘world petroluem law’ is “pure and simply a gentleman’s agreement which does not create any duty or binding obligation to be enforceable in any court of law”.

    NBPower tried to sue them for 2.2 BILLION, plus 500 million for ‘administrative costs’ of the lawsuit. The ‘cash settlement’ which came from arbitration was 330 million, which kind of tells you what the courts thought of NBPower’s argument that an MOU was legally enforceable. From Venezuela thats just ‘shut up and go away’ money.

    As for China, orimulsion is a heck of a lot better than coal, which China heavily relies on. They also purchased it in such quantities that it makes economic sense and more importantly, they built their own processing facility in Venezuela. Venezuela is currently no longer producing it.

    AIMS, of course, used the political angle in describing NBPower’s utter stupidity in “relying on a military strongman”, when, to be fair, there were at least seven other countries that were in negotiations, including Florida, where it was finally stopped by environmental activism (and politics no doubt, but when it comes to cheap fuel, politics tends to take a backseat).

    The Oil and Gas journal (part of the conspiracy?) states that the technology was once ‘the pride of Venezuela’s engineering industry’, and that it fell out of favour because engineers were one of the most vocally celebratory groups when Chavez was ousted in a coup and was ‘disappeared’. When he got back, he wasn’t quite so pleased. And by the way, if you’ve never watched “The Revolution Will Not Be Televised”, its probably one of the best documentaries ever made, along with ‘Sir, No Sir’ (and its free on youtube). Plus, OPEC was continually complaining that orimulsion was not calculated with other oil products in their quota system, throwing the system out of whack. And of course orimulsion is made with a surfacant which is EXTREMELY nasty if it were (when it does) come into contact with marine life.

    I think the conspiracy angle comes out when you say “HE cancelled the contract”. Again, there was no contract, and there is no evidence that Chavez himself played any part in the (lack of) deal. The way you write your article makes it sound like he was sitting in his evil mansion plotting his malice on New Brunswick, when its doubtful he ever even heard of the place.

    Your blogs are usually pretty heady on details and statistics, it really doesn’t look ‘professional’ when it consists of “I don’t really know much about this but here’s what I think..” I expect that from Fox News, but you are usually much more professional than them (not that you aren’t entitled to your own opinion, but its usually a BIT more informed).

  2. I remember. It’s kinda where NB started getting into such debt. That is largely where it started…at least on the scale we have now. I remember reading about how the government at the time did not actually have a contract with Venezuela but had “wording deemed to be essence to a contract”…hahaha

  3. Geesh, now people are going to start blaming Chavez for NBPowers debt! Just to correct some bad memories -during the years when the orimulsion fiasco was going on, NB Power actually had its LOWEST level of debt.

    This is the debt levels from the NBPower financial reports:

    1998-3.1 billion
    99 – 3.0

    Pretty warm out today, I guess the cold of yesterday and the day before that was because of Chavez:)

  4. “This is the debt levels from the NBPower financial reports:”

    NBP financial reports provide debt levels that do not include the debt from Lepreau, so they are a poor indicator of NBP’s debt load.

    What orimulsion shows is the poor management of NBP and how that poor management has led to NBP’s current predicament. What we don’t really have yet is the backstory details – how much political interference played in those decisions and how many yes-men replaced the managers who did know what they were doing.

  5. I think its safe to say that you can’t blame Chavez for Point Lepreau. The point lepreau refit was long after the orimulsion fiasco, so even if you added in the debt from lepreau it would add to the reported debt being higher long AFTER the orimulsion deal. That brings the debt up past 1999 levels, however, I can’t find the data on the debt from the nineties so its at least pretty clear that the notion that orimulsion has something to do with recent debt levels isn’t true.

    I don’t think it shows poor management, and what you DON”T have is a decent media, because most of that ‘political backstory’ is buried in government documents. Pretty sure I’ve posted this before, but the REAL problem with Orimulsion was there wasn’t ENOUGH politics. The fact was, orimulsion was the cheapest route to cheap energy. At the time, the public intervenor came out and said “hey, why not invest a little bit more money, and refit it for natural gas”. This is what a lot of places did, Maine for one, so now they benefit from cheap natural gas. However, AT THE TIME, natural gas prices were quite high, and NBPower wanted to go with what is cheapest.

    That’s sort of like going into the Yugo lot and saying ‘this is what we need’ simply because the price is right. And sadly enough, NOW they are talking about refitting with natural gas. Mind you, what we may very well see is gas prices will go high again just as a gas plant is built. For right now, even the LNG terminal is losing money because prices are so low.

    As for the problems, here’s an interesting remark from the wikipedia entry:

    According to energy analyst and long-time critic Tom Adams, NB Power “has been the most oil-dependent grid-connected utility in North America”.[21] New Brunswick historically was politically dominated by the Irving family whose company Irving Oil remains the dominant fossil fuel supplier in the province. Conflicts of interest have often been noted between supply-side interests in petroleum or nuclear industries and the NB Power board. The utility is notably lax in energy demand management and other means to reduce energy demand, and under current President Gaetan Thomas has been quoted in the press proposing additional nuclear reactors and other supply solutions to grid management problems. He has actively defended NB Power’s reliance on nuclear power.[22]

  6. Just thought its worth pointing out some other facts about the orimulsion deal, its cost was just over half a billion spread over a few years during which their debt was the lowest.

    However, in another article that I found, the ‘cost’ can’t be reflected in that number because apparantly there were a couple of unintended consequences of the refit, first in greenhouse gas emissions which don’t really have a price tag, but more importantly in operating efficiencies. The last consequence was the availability of a byproduct which was then handed over to Irving in the manufacture of its gypsum board at its new gypsum factory in Saint John. So not only did they get federal money for tearing down their shipyard and building a wall board factory, they also got a cheap ingredient for their wallboard.

    But there are at least some jobs created there, which means all that money from the orimulsion deal wasn’t simply thrown out the window.

  7. “But there are at least some jobs created there, which means all that money from the orimulsion deal wasn’t simply thrown out the window.”

    I am sure Mr Tozer might say the same think re ATCON. Not many would agree with him, though. And nor will many agree that the orimulsion deal has any significant redeeming qualities. The political backstory re NBP, orimulsion, and lepreau will make a great book someday.

  8. Hey, I’m certainly not defending the decision. But the people who got a paycheque, and the government which got taxes usually see things differently. In an ideal world we would hope that Venezuela would live up to an MOU, but the point is they don’t have to, and maybe I’m getting too old and too conservative, but to my mind the guy who is dumb enough to spend all that money before getting a signed contract is the guy who bears most of the blame. Particularly when we have NO idea why the decision was made from Venezuela’s point of view.

    The ATCON deal would probably make an even better book (and had they become a success story people would be singing a different tune), but sadly, there is a real dearth of writers from there. The only political book I’ve seen in the last decade and a half was that CBC guy who wrote about how Bernard Lord brought together COR and the PC’s, which was about as interesting as watching paint dry, and apart from two history books and a couple of Stuart Trueman and picture books, are all most libraries have. Meanwhile, Graham’s bailing on public insurance, the caissie populaire fiasco, Irving’s property tax cap on in LNG terminal-not to mention the wallboard company, and I’m still tired and not even thinking hard! Heck even just the list would make good reading. There are certain guys here who are good writers, maybe they should look into another source of income:)

    To me, it shows the real value of democracy and the continuing costs of our form of government. Back in the day, most people were agreeing with the public intervenor and saying it would be crazy to invest in a product that only has one source (for another thing on day two Venezuela could have turned around and jacked up the price).

    Meanwhile, we live in an age where the younger generation has been pretty much instilled in the value of the green revolution, and as the wikipedia article says, the current head of NBPower is still thinking about another nuclear power plant when you could be benefitting from dirt cheap natural gas IF a little more investment had been made. Meanwhile, there’s probably another good book in Siemans cash cow from NBPower-the contract to provide all those ‘smart meters’ to all the homes. We’ve had one for about five years now and I haven’t even looked at it since it was installed. Apparantly people are too stupid to figure out “gee, when I’m home and have all my lights and computers on, I use a lot more power than when I’m gone”.

  9. > He cancelled NB Power’s orimulsion contract – I think he preferred to sell the stuff to the Chinese – costing New Brunswickers ultimately hundreds of millions of dollars.

    Actually, I was around back then, and my recollection was that no contract had been signed and that the government of the day made a substantial investment in a power plant on the speculation that they would be able to get the orimulsion.

  10. Just to be fair and to give a heads up to what is coming, the main reason for those smart readers isn’t for your benefit-what it means is that as soon as they are installed NBPower will be billing differently for different times of the day (if they don’t then they are REALLY wasting money).

    Ours changed from a standard rate to 6.3 cents per Kw/h from 7PM to 7 AM, plus weekends and holidays. 9.9 cents from 11 AM to 5 PM, and 11.8 cents 7 AM-11PM, and 5 PM to 7PM.

  11. “my mind the guy who is dumb enough to spend all that money before getting a signed contract is the guy who bears most of the blame.”

    So you have come around full circle now, and agreed that NBP mismanagement was the problem.

  12. The blog and a comment practically blamed Chavez for the deal, and I said it was more the fault of NBPower than Venezuela. However, ‘mismanagement’ only applies to the contract, and it may be common for MOU’s to be used, we really don’t know. It may be GOOD management, but not for the best interests of NEw Brunswickers. Point Lepreau is GREAT for all those engineers and the nuclear industry in NB, that doesn’t necessarily make it good policy for the province.

    Like I said orimulsion to me doesn’t show NBP mismanagement, only that NBP may have very different interests than those of the population, as the wiki post says. That Venezuela bailed may simply be the bad luck that happens all the time in all kinds of industries, and at least SOME good came of it. However, if PEOPLE had had a ‘vote’ on the matter, that policy decision may have been averted. But sometimes jjjj happens. If somebody knows WHY a contract wasn’t signed, that would make me change my mind, but maybe contracts weren’t common.

    In short, we can all agree that the primary blame isn’t on Chavez.

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