Corporate presence dominates Sask. Party 2010 Saskatoon Premier’s Dinner; Saskatoon Northwest candidate Gordon Wyant’s dubious record

The Saskatchewan Party leader’s dinner at TCU Place in Saskatoon on April 29, 2010, reportedly drew a capacity crowd of 1,100 guests to hear Premier Brad Wall’s speech. [Parties in election mode (StarPhoenix, June 3, 2010)]

That may be true, but the majority weren’t there as individuals. They were attending as representatives of a corporation.

According to a seating plan and spreadsheet for the fundraising dinner, 194 companies accounted for 1,002 (91%) of the tickets. Three constituency associations bought 18 tickets and the Saskatchewan Party Youth received 30. The remaining 50 tickets went to Saskatchewan Party officials and other individuals. The event raised about $44,500.

The documents containing the information were apparently left lying on a table after the event was finished.

The governing Saskatchewan Party relies heavily on the private sector for the bulk of its donations. In 2009, the party generated $1,558,559 from corporations and individuals. Of that total, $871,294 (55.9%) were corporate contributions.

The Saskatchewan Party has claimed in the past that it is beholden to no one. And yet, how long would it be before donations from, say, the energy industry, dried up if the Wall government were to stop meeting with that sector’s Calgary-based lobby groups and began ignoring their constant whining about corporate taxes, royalty rates and labour laws?

The record of attendees to the premier’s dinner shows who’s really in charge.

The list includes plenty of the usual suspects that have been contributing to the party for years: KPMG, MacPherson Leslie & Tyerman, Brandt Tractor, Alliance Energy, Dundee Developments, Rawlco Radio, and Shaw Communications.

Then there’s the business and industry lobby groups that seem to help set government policy: North Saskatoon Business Association, Saskatchewan Chamber of Commerce, Canadian Energy Pipeline Association, Canadian Restaurant and Foodservices Association, Saskatchewan Mining Association, Saskatoon & Region Home Builders, and Saskatchewan Potash Producers Association, to name a few.

Read through the list a few times and some interesting names begin to stand out:

▪ Canpotex Ltd., the world’s largest exporter of potash and center of controversy in the current hostile takeover bid of PotashCorp by BHP Billiton;

▪ Vancouver-based Bill 80 supporters Ledcor Group of Companies;

▪ SaskPower board members Bryan Leverick and chair Joel Teal;

▪ SaskTel chair Grant Kook;

▪ Carol Reynolds, Genome Prairie director of communications and government relations. Reynolds was the campaign manager for Saskatoon-Rosetown-Biggar Conservative candidate Kelly Block during the 2008 federal election, and is rumoured to be a potential City of Saskatoon Ward 5 candidate should the Saskatchewan Party win the Saskatoon Northwest by-election on October 18, 2010; and,

▪ Wayne Watts, president of Liquid Capital Prairie Corp., and chair of the Saskatchewan Minimum Wage Board that put the screws to low income workers last fall recommending no increase to the minimum wage until the next review in 2011.

The City of Saskatoon, down for one ticket, was represented by Councillor Bob Pringle. However, the spreadsheet appears to indicate that Mayor Don Atchison attended and sat with Saskatoon law firm WMCZ Lawyers & Mediators. It seems the company paid for nine tickets, including Atchison’s. It’s a clever way to get the mayor to the event without having to record him as a contributor.

Lawyer Gordon Wyant is on the list as representing law firm McKercher LLP where he’s a partner. Wyant is the city councillor for Ward 5 and also the Saskatchewan Party candidate in the Saskatoon Northwest by-election to be held October 18, 2010. Wyant was the business manager for Serge LeClerc – the Saskatchewan Party MLA for the area before vacating his seat amid controversy on August 31, 2010 – during the 2007 provincial election.

During Wyant’s near seven year tenure on council, civic records indicate that Saskatoon’s long-term debt has increased from $23 million in 2004 to a projected $171 million by the end of 2010. Reserve funds have dwindled from $145.9 million in 2003 to $67 million last year. Municipal property taxes (per capita) have gone up 25 per cent, and the operating budget has climbed 62.7 per cent since 2003.

Earlier this year, the StarPhoenix reported Wyant as having the worst attendance record among councillors attending 63 of 76 meetings since the 2006 civic election. [Atchison never missing in action (StarPhoenix, March 2, 2010)]

Council minutes show that Wyant has missed two more meetings since the story was published: a regular one on May 10, 2010; and, a special meeting held July 2, 2010, to discuss the provincial disaster assistance program as a result of the very heavy rainfall that hit Saskatoon during the night of June 29/ 30, 2010.

Is this what Saskatoon Northwest residents have to look forward to should the Saskatchewan Party win the seat?

Several companies were given the five-star treatment by having a Saskatchewan Party MLA assigned to their table:

▪ Canadian Energy Pipeline Association + Nancy Heppner (Martensville)
▪ Deloitte & Touche LLP + Don Morgan (Saskatoon Southeast)
▪ Eli Lilly + Don McMorris (Indian Head-Milestone)
▪ MacPherson Leslie & Tyerman LLP + June Draude (Kelvington-Wadena)
▪ McDougall Gauley LLP + Rob Norris (Saskatoon Greystone)
▪ NuCoal Energy Corp. + Randy Weekes (Biggar)
▪ Ramada Hotel + Ken Cheveldayoff (Saskatoon Silver Springs)
▪ St. Peter’s College + Delbert Kirsch (Batoche)
▪ Stuart Olson Constructors Inc. + Joceline Schriemer (Saskatoon Sutherland)
▪ Jeff Ehlert + Donna Harpauer (Humboldt)

Aside from the premier, the other big name on the bill that evening was B.C. Premier Gordon Campbell, who introduced Wall.

Campbell was in the province for meetings and to sign the New West Partnership Agreement between Saskatchewan, Alberta and British Columbia on April 30, 2010, in Regina. Wall’s dinner was probably one of the few friendly places left for the embattled premier to visit.

According to the Vancouver Sun, a poll released September 10, 2010, by Angus Reid Public Opinion shows that only 12 per cent of British Columbians approve of Campbell’s performance and 73 per cent say their opinion of him has worsened over the past three months, making him Canada’s most unpopular premier. [Gordon Campbell Canada's most unpopular premier, poll finds (Vancouver Sun, September 11, 2010)]

After nine long years, it appears British Columbians have finally had enough of Campbell’s nasty, ugly brand of conservatism. The final straw seems to have been his government’s introduction of the hated harmonized sales tax that took effect July 1, 2010.

On July 23, 2009, Campbell announced plans to replace the GST and PST with an HST of 12 per cent. [B.C. moves to 12 per cent HST (CBC News, July 23, 2009)]

However, in the run-up to the provincial election held May 12, 2009, the Campbell Liberals promised voters that they were not contemplating the adoption of the HST.

Saskatchewan residents are already used to this kind of betrayal.

Prior to the November 2007 provincial election, Saskatchewan Party Opposition leader Brad Wall said essential services legislation wasn’t necessary in the province. [Basic honesty minimum expectation (StarPhoenix, December 7, 2007)]

However, within weeks of forming government, the Saskatchewan Party introduced The Public Service Essential Services Act.

Wall promised to fight the federal government, regardless of who was in power, to exclude non-renewable resources from the equalization formula that is costing Saskatchewan hundreds of millions of dollars in lost resource revenue each year.

That promise went out the window as soon as Wall became premier.

On July 10, 2008, the Wall government announced it was withdrawing a reference to the Saskatchewan Court of Appeal on the equalization issue, effectively ending the fight.

Before the election, Wall said reopening the Prince Albert pulp mill would “be among the top priorities” of a Saskatchewan Party government. He promised to “move heaven and earth” to get it done.

On December 21, 2009, Montreal-based Domtar announced plans to demolish the paper mill, formerly operated by Weyerhaeuser and permanently closed in 2006, putting some 700 people out of work. [Prince Albert pulp mill being dismantled (CBC News, December 22, 2009)]

Should Wall’s premiership follow the same trajectory as that of his friend, Gordon Campbell, Saskatchewan could be in for some very long, dark days.

B.C. Premier Gordon Campbell at 2010 Saskatoon Premier’s Dinner

Lake Placid River Landing Village: 100 days later and Parcel “Y” is still empty; ‘we now have financing in place,’ Lobsinger to Cheveldayoff on May 28

Today marks 100 days since Saskatoon city council officially caved in to Lake Placid Developments request to re-open the sale agreement for Parcel “Y” and adjacent lane that died October 30, 2009, when the developer failed to meet a firm payment deadline for the full balances owning on the land.

On June 14, 2010, council voted 9-2 in favour of entering into a sale agreement with Lake Placid to sell the land for $5.24 million – less than half the appraised market value of $11 million.

The agreement gives Lake Placid until November 1, 2010, to supply the city with a copy of a commitment letter from a financial institution or other lender, or such other documentation satisfactory to the city, which shows that it has obtained financing in an amount sufficient to complete construction of the proposed River Landing Village to grade level, including excavation and shoring footings and foundation and all levels of the underground parking structure.

The deal reversed a decision by councillors on August 19, 2009, that if the developer failed to meet the October 30 deadline the sale agreements for Parcel “Y” and lane would be terminated without a further resolution of council.

Delays and missed deadlines have plagued the development since Lake Placid submitted its request for proposals in September 2007.

As of September 22, 2010, the Lake Placid sales trailer located on the site of the former Royal Canadian Legion, Branch #63 building next to Parcel “Y” remains closed, on blocks, and without power.

Lake Placid CEO Michael Lobsinger and his partner, Dr. Karim Nasser of Victory Majors Investments Corporation, have repeatedly assured that financing is in place and the project ready to go.

Lobsinger and Nasser addressed council on March 22, 2010, hoping to resurrect the long dead sale agreements.

NewsTalk 650 reported Lobsinger saying that with council’s approval, the massive condo-hotel-residential-retail complex could be completed in 36, to 38 months.

“We are in position, along with Dr. Nasser, are in a position to close on the land immediately,” said Lobsinger. “And start excavation on the site within 45 days.” [Lake Placid Developer Ready to Build (NewsTalk 650, March 22, 2010)]

CBC News has Nasser on record as saying pretty much the same thing that work on the project could begin 45 days after the city sells the land, and the development could be completed within three years. [Saskatoon gives River Landing bid another chance (CBC News, March 23, 2010)]

According to the StarPhoenix, Lobsinger told reporters after the March 22 meeting that he wasn’t interested in another request for proposals.

“We’re ready to get going literally in May. We can start now instead of two years from now,” he said.

Lobsinger was asked about the elusive signature that he said was forthcoming within days when he spoke to council last year on financing the project, but said it was “not an issue for the public.”

“Nothing has happened, I’m one signature away,” he said. [Developers tout plan (StarPhoenix, March 23, 2010)]

That was six months ago.

On May 26, 2010, the StarPhoenix reported that the city had reached an agreement with Lake Placid, in partnership with Nasser’s company, on the price of Parcel “Y”: $5,240,494. The deal was struck at a closed door meeting of city council, sitting as an executive committee, the previous day. However, the agreement still needed council’s formal approval, set for June 14, 2010, because the purchase price was for less than market value.

“We’re ready, willing and able now to proceed with the $200-million project,” Lobsinger said on May 25. “We have financing in place . . . and are ready to move dirt in June or July.

“We’re going to be going forward with all phases of the project right away.” [City sets Parcel Y price (StarPhoenix, May 26, 2010)]

The terms of the sale agreement were released the week of June 7, 2010.

On June 11, 2010, the StarPhoenix reported Nasser saying that a deal approved by city council to sell the land will allow the company to complete financing commitments.

“We need the land before anybody will say yes, 100 per cent,” Nasser said. “Once the land title is in our hands, it should only take a couple of weeks.”

StarPhoenix reporter David Hutton revealed that Lobsinger and several business groups circulated a letter soliciting support, a call that was met with dozens of letters to city hall, including one from the then Enterprise Minister Ken Cheveldayoff, who urged council to move forward on the sale, a rare move for a cabinet minister. [Minister backs deal (StarPhoenix, June 11, 2010)]

“As the Minister of Enterprise, the Minister Responsible for Trade and the Minister Responsible for SaskEnergy I am pleased to forward this letter to you in support of the Lake Placid project in Saskatoon,” Cheveldayoff said in the letter dated June 8, 2010.

“I understand that City Council will vote on the final approval of this project on June 14, 2010. I strongly encourage the Mayor and all Councillors to support the Lake Placid project so we can continue to build our city for a very bright future.”

Cheveldayoff lives in Saskatoon. You’d think by now he would be aware of the project’s history and have more sense than to get drawn into the controversy. Apparently that’s not the case.

The minister’s letter was in response to an email from Lake Placid on May 28, 2010, seeking his support. A copy of the email was recently obtained from Enterprise Saskatchewan through an access to information request.

In the message, Lobsinger notes “we now have financing in place, a new partner in Dr. K. Nasser and we can now move forward with this project.”

Lobsinger further states that, “The last hurdle that we need to climb is for final approval of this project which will be voted on June 14th, 2010 at City Council.”

In saying that ‘we now have financing in place,’ Lobsinger seems to be implying that the funds weren’t there earlier even though that’s what his company advised the city last year.

In March 2009, Mayor Don Atchison told the StarPhoenix that Lake Placid had assured city administration it has financing in place for the project and was awaiting the change in provincial legislation that would introduce “strata” land titles to allow for separate condo corporations to operate on the same site. Lake Placid required the legislative change in order to move forward. [Construction delay (StarPhoenix, March 12, 2009)]

With Lake Placid there seems to be no such a thing as a last hurdle. Almost from Day 1, the project has been mired in problems. The only thing keeping it alive appears to be city council’s desperation to get something, anything, built. Bending the rules, favouritism and deadline extensions now seem to be the norm.

Lobsinger and Nasser addressed council again on June 14, 2010. This time they were accompanied by an army of local business weasels declaring their undying support for the project. The parade of suits included: Keith Moen, executive director of the North Saskatoon Business Association; Randy Pshybelo, executive director of the Riversdale Business Improvement District; Terry Scaddan, executive director of The Partnership; Dale Botting, the former CEO of Enterprise Saskatchewan; Brian Chalmers, president of the Greater Saskatoon Chamber of Commerce; and, Alan Thomarat, executive director of the Saskatoon & Region Homebuilders’ Association.

Of course, if the Lake Placid project fails to materialize these folks will likely disappear into the woodwork when it comes time to clean up the mess.

According to the meeting minutes, Lobsinger indicated “that the financing is in place for the proposed project.” Nasser said “that the project is ready to move forward.”

In the StarPhoenix the next day, reporter David Hutton wrote: ‘Lake Placid CEO Michael Lobsinger said the agreement for the sale of the land paves the way for the company to secure financing.

‘Lake Placid will be putting out tenders for surface excavation and going through the legal hoops to get title to the land, a process Nasser hopes could be completed in three to six weeks, depending on land titles.

‘“We can move forward and move forward quickly,” Lobsinger told council.’ [City backs Lake Placid (StarPhoenix, June 15, 2010)]

And the wait continues.

Not everyone is enamoured with Lake Placid. In council’s agenda package that evening was a letter from James Polley of Allan’s Landscaping Ltd. in Saskatoon recommending that the developer’s project not be approved because of an outstanding account. It seems Allan’s did some work for Lake Placid in the summer of 2008 but did not receive payment for it. The balance due was $8,739.76.

“If this is how they deal with small companies, by not paying their bills, and have failed to follow through with their first agreement with the City of Saskatoon. How do we see they are going to be a better corporate citizen in the future?” said Polley.

In an email on September 17, 2010, Polley confirmed that the bill remains unpaid and Lake Placid still on the books as a bad account.

Then, on July 13, 2010, a Saskatoon resident posted a message on SkyscraperPage.com, an Internet forum discussing development news and construction activity on projects from around the world, alleging they received an email update from Lake Placid. The message reads, in part: “Recently the City of Saskatoon gave final approval to Lake Placid Developments (SK) Inc. and its partner Dr. Nasser to proceed with the River Landing Village. We are proceeding with consolidating the land title and will be announcing our sod turning event in the very near future.

“We will be relocating our sales trailer to an adjacent property near our construction site. As a registrant you are considered our VIP and will be given top priority at our upcoming sales event. All registrants will be sent personal invitations and will be given the opportunity to review the suites and select the units of their choice in advance of any public offering. Please stay connected for information updates that will be posted on our website.”

To date, no sod turning ceremony has been announced and the sales trailer hasn’t moved an inch since last fall. The 1-888 number advertised on the front of the trailer does not appear to be in service either.

Back in October 2008, it was reported that sales manager Richard Lobsinger, the CEO’s son, had moved to Saskatoon. The company at the time was preparing to take deposits on condos. [Fingers crossed for financing (StarPhoenix, October 17, 2008)]

Now when you check the Lake Placid website Richard Lobsinger no longer seems to be part of the team.

And finally, an unsettling news story has emerged out of Calgary concerning Lake Placid’s stalled Centuria on the Park project at 13th Avenue and 2nd Street S.W., which has reportedly been plagued with problems for nearly three years.

According to the Calgary Herald, the city’s building inspection department on September 10, 2010, ordered the developer to fill the empty excavation pit by November.

That follows a previous order this summer, urging the company to build the site up to ground level, said reporter Sherri Zickefoose.

Uncertain about the safety of shoring walls around a large construction hole, the city declared the site itself is creating endangerment to the public as well as potentially damaging properties adjacent to it.

A company spokesperson could not be reached for comment.

The city has given Lake Placid two weeks to start the backfilling and until November 15, 2010, to finish. [Beltline condo developer ordered to fill excavation pit by November (Calgary Herald, September 12, 2010)]

At least Saskatoon doesn’t have to worry about that. Not yet anyway. But council will find a way to make it happen.

Lake Placid sales trailer, Sept. 2010

Wall government refusing to disclose terms of Northland Power PPA’s; 9 out of 11 SaskPower board members donated to Saskatchewan Party

True to its word, SaskPower has refused to disclose the terms of two power purchase agreements (PPA) it signed with Northland Power Inc.

In February 2010, SaskPower entered into a 20-year PPA with Northland Power, a private company based in Toronto, to provide 261 megawatts (MW) of based power to the provincial electrical grid in 2013. The natural gas-fired facility will be located in the North Battleford area, with construction expected to begin in July 2010. Generation facilities that provide baseload power provide energy at a constant rate. [SaskPower news release, Feb. 8, 2010]

Prior to that, in September 2009, Northland Power was chosen to provide 86 MW of peaking generation for SaskPower, beginning in December 2011. The companies signed a 25-year PPA. Northland Power will construct and operate a natural gas power station near the Tantallon Switching Station, located 40 kilometres north of Moosomin. Facilities that provide peaking power can be brought into service quickly to meet sudden increases in demand. [SaskPower news release, Sept. 24, 2009]

SaskPower’s news releases omitted key information about the agreements.

According to Northland Power Income Fund’s annual information form, filed with securities regulators in March of this year, under the PPA’s the projects “will receive monthly payments that are designed to cover all fixed costs and investment returns.” The agreements also provide “protection against changes in the market price of natural gas, as fuel costs are passed through to SaskPower.” Furthermore, the contractual structure of the projects “is designed to ensure predictable, stable and sustainable cash flows over the entire” term of the PPA’s.

Or to put it another way, the one-sided deals guarantee a profit for Northland. What they ensure is a predictable, stable and sustainable cash flow from Saskatchewan to Ontario.

At the February announcement, Gary Wilkinson, vice-president of planning, environment and regulatory affairs for SaskPower, said the company’s “top priority… is to ensure that the province’s residents and businesses have a reliable and sustainable supply of electricity for years to come.” [New North Battleford plant to provide power to grid (StarPhoenix, February 9, 2010)]

SaskPower is more than capable of fulfilling its mission by developing these types of projects on its own. Any profits would remain in Saskatchewan; however, the Wall government has chosen to send those dollars east to a private company in Toronto.

At a sod turning ceremony in North Battleford on June 14, 2010, for the North Battleford Energy Centre, Garner Mitchell, acting president and CEO of SaskPower, said the terms of the PPA are confidential.

“These are very complex contracts,” Mitchell said, adding the deal includes “everything from capital and fuel to labour costs and financing. So there are many factors that go into it. That’s why we don’t go public (with the contract details).” [Officials break ground on $700M plant (StarPhoenix, June 15, 2010)]

With that in mind, on June 16, 2010, an access to information request was submitted to SaskPower for copies of the two PPA’s. SaskPower’s legal department responded two weeks later to say that because the information requested affects the interest of and/or relates to a third party, it was required to contact the third party involved, presumably Northland Power, to see if they had any objections to releasing the records.

On August 20, 2010, SaskPower disclosed the documents, but with most financial, commercial, scientific, technical or labour relations information supplied in confidence by Northland to the provincial government blacked out, pursuant to section 19 of the Freedom of Information and Protection of Privacy Act.

The PPA’s are written in legalese and dense technical jargon. So unless you’re a lawyer or work in the industry they’re likely to be incomprehensible to most people.

The peaking PPA was made September 22, 2009, between SaskPower and Spy Hill Power L.P., a subsidiary of Northland Power Income Fund.

Under the agreement, Spy Hill is to construct, at its sole cost and expense, the power plant on land leased from SaskPower at $1.00 a year plus GST. [Schedule C]

SaskPower is required to arrange for the construction and commissioning of the natural gas delivery facilities by TransGas so that natural gas may be delivered to the Spy Hill Power Plant on or before the target interconnection in-service date of September 1, 2011. [Sec. 7.1 (a)]

SaskPower shall, at its expense, procure and arrange for the supply and delivery of all natural gas required to commission, test and make available Spy Hill’s facilities and supply metered energy. [Sec. 7.1 (b)]

Spy Hill will receive and purchase all metered natural gas supplied by SaskPower at the daily spot gas price per gigajoule (GJ) as listed in the Canadian Gas Price Reporter published by Canadian Enerdata Limited. [Sec. 7.3]

The PPA contains a number of base tariffs payable by SaskPower for all electrical generation capacity and metered energy received and all other ancillary services. The Wall government is refusing to reveal the cost of these rates to the people of Saskatchewan. [Schedule E] The tariffs include:

▪ Availability Tariff – to compensate Spy Hill for its cost of capital relating to constructing and maintaining its facilities amortized over 25 years, and for the ancillary services provided from its power station. The rate will increase annually on January 1st by an amount equal to 2% of the tariff in effect during the preceding operating year.

▪ Interconnection Recovery Tariff – to compensate Spy Hill for its cost of capital associated with interconnecting its facilities with SaskPower’s transmission system.

▪ Energy Tariff – to compensate Spy Hill for the natural gas consumed in the course of supplying metered energy.

▪ Starts Tariff – to compensate Spy Hill for the natural gas consumed and equipment wear and tear incurred during the course of starting its facilities and ramping to full load and back down to gas supply shutoff.

▪ O&M Tariff – to compensate Spy Hill for its variable cost of operating and maintaining the power plant. The O&M Tariff, the fixed “per turbine” portion of the Starts Tariff and the LD Cap will increase annually on January 1st by an amount equal to the percentage change in the SCPI (the “All-items Consumer Price Index” for Saskatchewan not seasonally adjusted, as published by Statistics Canada) over the immediately preceding operating year.

▪ Synchronous Condenser Mode Tariff – to compensate Spy Hill for making available or delivering synchronous condenser services to SaskPower.

The total cost of the Spy Hill project is approximately $145 million.

In a joint venture, Aecon Group Inc., Canada’s largest, publicly traded construction and infrastructure development company, and Black & Veatch, a leading U.S.-based engineering, consulting and construction company, were awarded an approximately $60 million contract to build the peaking plant. [Aecon Group Inc., News Release, June 30, 2010]

According to financial records filed by the Saskatchewan Party with Elections Saskatchewan in April 2010, Aecon Group Ltd. contributed $374.64 to the party in 2009.

The baseload PPA was made February 5, 2010, between SaskPower and North Battleford Power L.P., a subsidiary of Northland Power Income Fund.

Under the agreement, North Battleford Power is to construct a nominal 260MW natural gas fired combined cycle power generation station by the target commercial operation date of October 1, 2013. The facility will be constructed on a 20 acre parcel of optioned land located at SW SEC 7 TWP 43 REG 15 W3M in the RM of North Battleford #437. [Schedule A]

On the labour front, the company is required to “give full and fair opportunity in the provision of goods and services and in employment opportunities in connection with the construction and operation of the Facilities to residents of Saskatchewan, all within the context of a competitive business environment.” [Sec. 4.3 (g)]

North Battleford Power is required to procure and arrange for the supply and delivery to its facility all natural gas required to commission, test and operate the plant. However, section 10.2 of the PPA indicates that the company “will receive compensation for the costs of the supply and transportation of all natural gas required in accordance with Schedule D [the tariff and pricing schedule].”

Additionally, the agreement notes that if the rate structure of any of the transporting pipelines changes, then either party may, by notice to the other given within sixty days of the change to the rate structure, require that the variable and fixed gas transportation costs be adjusted or supplemented to reflect the new rate structure and recover what would be the actual costs of transporting natural gas on the pipeline route.

If the parties are unable to agree on such ‘redetermination’ within sixty days the matter will be resolved through a dispute resolution process. [Sec. 10.2]

This would seem to favour North Battleford Power. The pipeline or ‘deemed route’ appears to involve such companies as NOVA Gas Transmission Ltd., EnCana Corporation, TransCanada Corporation, and TransGas Limited. The cost of transporting natural gas is more apt to go up than down.

Similar to the peaking agreement, the baseload PPA contains a tariffs and pricing schedule outlining the amounts payable by SaskPower over the next 20 years. The Wall government is refusing to disclose those as well. [Schedule D]

▪ Capacity Tariff – to compensate North Battleford Power for its cost of capital relating to constructing and maintaining its plant amortized over 20 years, and for the ancillary services and operating reserve provide from the facilities. The rate will increase annually on January 1st by an amount equal to 2% of the capacity tariff in effect during the preceding operating year.

▪ Interconnection Recovery Tariff – to compensate North Battleford Power for its cost of capital associated with interconnecting the power plant with SaskPower’s transmission system amortized over 24 months. Once the final interconnection cost has been determined by SaskPower, the base interconnection recovery tariff will be adjusted up or down in proportion to the difference between the preliminary interconnection cost and the final interconnection cost, retroactive to the commencement of the commercial operation date.

▪ Energy Based Pricing – to compensate North Battleford Power for the natural gas consumed in supplying metered energy and for variable operating and maintenance to produce such metered energy.

▪ Pre-COD Charges – SaskPower must pay the ‘full load price’ (the price for certain of the metered energy expressed in dollars per MW hour) described in section 1.3 (Energy Based Pricing) for all energy delivered prior to the commercial operation date.

▪ Fixed Natural Gas Transportation Costs – SaskPower is required to pay these costs monthly to North Battleford Power. They are subject to adjustment in accordance with section 10.2 (Gas Transportation Costs) of the PPA and section 7.3 of schedule D (Tariff Escalations), which is intended to be a flow through of the fixed tariffs and costs actually paid by North Battleford Power to the transporting pipelines on the ‘deemed route’ to deliver the quantity of natural gas required to produce the full load capacity level at the full load heat rate.

The total cost of the North Battleford project is budgeted at approximately $700 million.

Construction of the facility began in May 2010. It is being built under an engineer, procure and construct contract by Kansas City based Kiewit Power Partners. [Northland Power Income Fund, News Release, August 30, 2010]

Saskatchewan Party financial records show that Peter Kiewit Sons, Co., a subsidiary of Kiewit Corporation, donated $2,267.49 to the party in 2009.

Resistance from SaskPower to privatize power generation was probably non-existent given that since forming government, the Saskatchewan Party has gradually stacked the Crown corporation’s board of directors with party supporters and contributors. The process started on January 22, 2008, when deputy premier Ken Krawetz, the then acting president of the executive council, signed an order in council firing the entire board.

Nine out of the eleven current SaskPower board members appear to have contributed to the Saskatchewan Party either as an individual or through their business. In several instances, the company they work for has also donated to the party. These include:

▪ Joel Teal, Chair, is the president of Dundee Developments/Homes by Dundee. Since 2003, Teal has donated $2,832.87 to the Saskatchewan Party and Dundee Development $11,284.06.

▪ Bill Wheatley, Vice Chair, is managing director, chief compliance officer and general counsel at Greystone Managed Investments Inc. in Regina. In the 1980’s, he served as chief of staff to finance minister Gary Lane in the disgraced Grant Devine Tory government. Wheatley has contributed $34,739.54 to the party since 2003, and Greystone Managed Investments $1,296.64.

▪ Mitchell Holash is a partner in the law firm of Holash Logue McCullagh in Prince Albert. He contributed $723.00 to the party in 2009 and the law firm $500.00 in 2007.

▪ Judy Harwood is the general manager of the Park Town Hotel in Saskatoon. She has donated $1,411.74 to the Saskatchewan Party since 2003.

▪ Michael (Mick) MacBean is the founder, CEO, and director of Diamond Energy Services, which has contributed $4,580.46 to the Saskatchewan Party since 2003. MacBean served as chairperson of the Enterprise Saskatchewan Energy Sector Team, another rat’s nest of Saskatchewan Party supporters. SaskPower was named by the sector team on at least two occasions as being a barrier to development. Once for its “regulations” and the other through “increases in power costs – the monopoly does not provide for competition and choice.” MacBean lives in Swift Current, Premier Brad Wall’s hometown.

▪ Bryan Leverick is the president of Saskatchewan-based Alliance Energy Ltd. Since 2003, Leverick has donated $1,775.00 to the party and the company a whopping $25,910.48.

▪ Ian Coutts, the president and co-owner of Coutts Agro Ltd., contributed $500.00 to the party in 2003.

▪ Lorne Mysko and his wife operate Riverview Bed and Breakfast in Saskatoon. He has donated $257.60 to the party and the business $500.00.

▪ Nick Kaufman is an associate of counsel at McCrank Stewart Johnson Barristers and Solicitors in Regina. Kaufman has contributed $500.00 to the Saskatchewan Party and the law firm $4,469.21.

The remaining two board members, Chief Tammy Cook-Searson and Gina DeVeaux, do not appear to have contributed to the party.

Wall gov’t fires SaskPower board, Jan. 2008

Wall gov’t begins appointing Sask. Party
friends and contributors to SaskPower board, Feb. 2008

BHP Billiton ‘has no intention of becoming incorporated’ in Saskatchewan: SREDA; company says tax abatement request an ‘administrative error’

Corporate Services report from July 21, 2010, city council agenda

BHP Billiton is in the midst of a dramatic US$38.6 billion hostile takeover bid for the world’s largest fertilizer producer, Potash Corporation of Saskatchewan.

The world’s largest mining company, on August 25, 2010, reported earnings of $12.72 billion for the fiscal year ended June 30, more than double the $5.88 billion earned in the previous year.

BHP’s revenue increased 5.2% to $52.8 billion from $50.21 billion. The company’s cash position also improved, swelling 15% to $12.46 billion from last year’s $10.83 billion, in spite of $9.8 billion in capital investment and debt reduction, the Wall Street Journal reported. [BHP vows restraint in its bid for Potash (Wall Street Journal, August 26, 2010)]

Despite the staggering riches, the Australian-based mining giant sought a five-year tax holiday from the City of Saskatoon for its new office space located in the downtown core.

City council was set to consider the matter on July 21, 2010. However, just prior to the meeting, representatives from BHP approached corporate services general manager Marlys Bilanski and asked that the request for tax abatement be withdrawn.

“They indicated that there was some confusion when the application was initially made and it was not their intent to request an abatement,” the city said in an email response to a query. There was nothing in writing, only the verbal request.

Gordon Graham, the company’s project director for potash development, elaborated further in an email on August 30, 2010: “The essence of the situation is there was an administrative error made in our office, and we had not planned on applying for the tax abatement. When we discovered that it had however been submitted, and was scheduled for discussion, we asked the council to pull the application.

“At this time we have no plans on resubmitting the application.”

BHP’s explanation seems a little suspect given that the application had been in the system for nearly two years and company lawyers were corresponding with officials in Saskatoon. Then there’s the timing. The decision to pull the plug on the request came just three weeks before BHP first approached PotashCorp on August 12, 2010, with a proposal to combine the two companies. The company is currently trolling for public support through feel good, full-page ads in the StarPhoenix and Leader-Post. News of a tax break might not go over too well right now.

The city’s business development incentives policy is designed to encourage companies to locate or expand their operations in Saskatoon, create new employment opportunities, place Saskatoon in a competitive position in attracting businesses that it would not otherwise occupy, increase the long-term viability of a project, and/or demonstrate the city’s commitment to a business or industry.

The policy offers corporations meeting the eligibility requirements for a property tax incentive a tax abatement of up to 100% of new or incremental taxes in year one, 80% in year two, 70% in year three, 60% in year four, and 50% in year five.

The value of incentives for new or local expansions in the manufacturing or processing sectors that will create 100 or more new, full-time or full-time equivalent employees may be eligible for tax abatements of up to 100% of new or incremental property taxes for a period of five years.

The Saskatoon Regional Economic Development Authority (SREDA) administers the policy on behalf of the city. An incentives review sub-committee consisting of five members of SREDA’s board of directors, one of which is a representative of city council and the general manager of corporate services or designated appointee, evaluates applications.

The SREDA board then reviews each incentive application and reports to city council recommending acceptance or denial of the request.

In a memo dated July 9, 2010, SREDA chair John Cross informed the city’s corporate services general manager that BHP’s incentive application was received on July 28, 2008.

Cross said BHP’s application was complete with one exception: “BHP is not currently incorporated in the Province of Saskatchewan, and has no intention of becoming incorporated in the Province of Saskatchewan.”

The SREDA board initially approved the application on July 30, 2009, “pending BHP correcting the deficiency in the application.”

BHP legal counsel, Fasken Martineau DuMoulin LLP, in a letter dated July 29, 2009, argued that “BHP Billiton Diamonds Inc. is incorporated pursuant to the Canada Business Corporations Act, under Corporation Number 448237-9, is in good standing with respect to the filing of Annual Returns, and has not been dissolved under that Act, and the Corporation is extra-provincially registered in Saskatchewan under Entity Number 101139980, with all required filings up to date.”

Cross concludes by stating that the SREDA board approved the application for submission to city council.

According to a separate memo from SREDA CEO Tim LeClair to Bilanski, dated February 15, 2010, the organizations incentives review sub-committee recommended approval of BHP’s application in February 2010.

SREDA approved the application without knowing the estimated value of the five-year tax abatement. In an email dated July 16, 2010, Bilanski notes that “this totally depends upon when and to what degree the building will be occupied and finished as tenancy increases. The maximum will be somewhere in the order of $150,000 (includes municipal, school and library taxes.)”

In his memo, Cross describes a similar situation with an application from Alstom Canada Thermal Services requesting a five-year tax abatement. Apparently, Alstom is not currently incorporated in Saskatchewan either, yet it appears SREDA did not ask the company to correct the deficiency. It instead argued that pursuant to the provisions of the Business Corporations Act (Saskatchewan) extra-provincially registration accords a corporation the same rights, privileges, and obligations to carry on a business, own land, initiate suits, etc. as if it had been incorporated in Saskatchewan.

“If there is no clear reason for Alstom to be incorporated in the Province of Saskatchewan, incorporation should not be required,” Cross said. On that basis, it appears SREDA approved the application for submission to city council. Without actually saying so, it would seem that SREDA is using the same rationale for approving the BHP application.

The problem is, regardless of what BHP’s lawyers and the province’s Business Corporations Act say, the application from BHP doesn’t appear to comply with the city’s business development incentives policy.

The city’s incentives policy is explicit; to be eligible for an incentive “all of the following criteria must be met.” The very first item on the list of requirements is: “The applicant must be a legally incorporated corporation in the Province of Saskatchewan.”

Cross said that BHP is not currently incorporated in the province. And yet, SREDA says in a document attached to Cross’s memo that the company “meets all of the eligibility requirements” of the city’s policy.

There is no grey area. The city goes so far as to bold and underline the word ‘all’ to drive home the importance of the eligibility criteria. The policy does not say that being extra-provincially registered satisfies the requirement that applicants must be a legally incorporated corporation in the province. The city has the power to amend the policy but hasn’t.

The policy does provide, upon the advice of SREDA and with the approval of council, for the criteria to “be waived or modified to recognize the uniqueness” of an incentive request. However, SREDA did not advise council to do that. The agency simply recommended the application be approved. BHP may be somewhat new to the city but they’re hardly unique.

BHP’s request for a tax break was all but ignored by the media. It seems only radio stations NewsTalk 650 and NewsTalk 980 took notice.

Mayor Don Atchison, who happens to be a SREDA board member, had no qualms with the tax abatement insisting it is a normal way of attracting business investment.

“Six years from now, when you still have nothing, you’ll still have nothing. It’s not into perpetuity. It’s (just) five years.” [Saskatoon Deciding on Proposed Tax Break for BHP (NewsTalk 650, July 21, 2010)]

Following the company’s decision to withdraw its request, Atchison said he understands that for some, the world’s largest mining company asking for a tax break might not look good, but maintains there’s a benefit to a five year tax break.

He says Saskatoon is competing with other cities to attract large companies like BHP Billiton. [Mining Giant Withdraws Request For Tax Break In Saskatoon (NewsTalk 980, July 22, 2010)]

Getting into the potash business has been on BHP’s radar for quite a while.

In the first issue of its quarterly newsletter Potash Pages, the company points out, “The potash industry is a fundamentally attractive one, with only three major basins (Canada, Belarus and Russia) and a growing world market. The potential for BHP Billiton in Saskatchewan is substantial with over 7,338 square kilometers of highly prospective exploration permits in the immediate vicinity of existing major potash mines. BHP Billiton is focused on developing the first new potash mine in almost 30 years in the province of Saskatchewan.” [Potash Pages, September 8, 2008]

It’s hard to imagine BHP would let a $150,000 tax abatement get in the way of coming to the province. There’s too much money to be made.

BHP is leasing the entire Discovery Plaza, located at 130 3 rd Ave. South. The office, according to SREDA, is the headquarters for Project Jansen and the Athabasca scale up and operations.

Discovery Plaza Inc. is owned by John Williams, president of North Prairie Developments Ltd. In the company’s November 2009 newsletter, North Prairie announced that BHP would be “the first major tenant” in the recently completed building.

Discovery Plaza is located on the site of the former Extra Foods, the downtown’s only grocery store that closed October 9, 2004.

In April 2006, Williams confirmed that his company bought the building. [Grocery Store Sold (StarPhoenix, April 12, 2006)]

In an interview with the StarPhoenix on April 15, 2008, Williams confirmed that a new office building would be built and should be ready for occupancy by June 2009. Williams said the investment was going ahead even though he had no firm commitment from a tenant.

“We’ve been talking to a few people, but we don’t actually have a firm lead client at this point in time, so we’re still working on a spec basis,” Williams said. “But we think the market’s there.” [Developer plans new four-storey building downtown (StarPhoenix, April 16, 2008)]

BHP’s subsequent tax abatement request in late July 2008 fits the timeline nicely.

However, the BHP website shows the company didn’t move to Saskatoon until September 2008 when its potash development office opened at Innovation Place.

SREDA helped roll out the red carpet for BHP on January 22, 2009, hosting a reception at the Sheraton Cavalier to welcome the company to the city.

BHP moved into Discovery Plaza on January 25, 2010. [BHP Billiton Expands Potash HQ (NewsTalk 650, January 31, 2010)]

City of Saskatoon business development incentives policy

BHP Billiton Saskatoon Office at Discovery Plaza

BHP Billiton ad, StarPhoenix, Aug. 27, 2010

BHP Billiton ad, Leader-Post, Aug. 28, 2010