Save the Bala Falls

Summary
Industry information shows that insurance coverage is the greatest operating cost for hydro-electric generating stations – more than all other operating costs combined. The only explanation we can think of is to cover the legal and settlement costs for drownings and other injuries to the public.

Detail
AECOM is multinational engineering services company with over 87,000 employees, and more than 450 offices in more than 60 countries. They have 53 offices in Canada alone.

The Ontario Ministry of Natural Resources requested AECOM Canada Ltd. to assess the economic impact of 41 proposed hydro-electric generating stations in Ontario. The result was this report.

While most of these 41 proposed projects were never developed, we have provided some analysis; of the report in this article, and of industry response to drownings in this article.  But what we wanted to highlight for this article are the operating costs presented on page 5. This shows that insurance for hydro-electric generating stations costs more than all other operating costs combined, including the generating station’s costs for; staff, maintenance, water use, land use, and administration.

As hydro-electric generating stations operate unattended and are automatically monitored for mechanical and other problems, there are very low risks to employees. Other conventional risks such as fire and theft would also be quite low. So it appears the reason for such high insurance costs is the insurance company’s costs of defending or settling lawsuits resulting from drownings and other personal injuries due to the operation of hydro-electric generating stations.

So one of the uses of the $100,000,000 subsidy from Ontarians to this private developer for power that isn’t needed would be to pay for their insurance to protect them from losses due to their drowning unsuspecting tourists.

Summary

1. We have learned from information received through the provincial government’s Freedom of Information process that contrary to commitments the proponent made for their environmental approval, the minimum flow through their proposed hydro-electric generating station at the Bala falls would be more than double the flow that caused the 2008 drowning of a 16-year-old boy at the nearby Wilson’s Falls Generating Station.

   This minimum flow through the proposed Bala generating station would begin, without warning at about noon, on about one-third of summer days – just when people would be most likely to be in the water.
    

2. To fool the government into believing there was meaningful consultation with the public on the trickle of flow the proponent would allow to continue to flow down the Bala falls, the proponent convened a farce of a “Flow Distribution Committee” process.

   At the same time the proponent was making flow commitments to their Flow Distribution Committee, the proponent was telling the Ministry of Natural Resources and Forestry there would be less flow and more danger than they were telling the Committee. That is, the proponent lied to the Flow Distribution Committee, and at the same time they lied to the government on what they told the Flow Distribution Committee.
    

Detail
To prevent the public from having any meaningful say in how much flow would remain over the Bala north and south falls, in 2010 the proponent convened a Flow Distribution Committee. Flow Distribution means determining for various times of the year and available flows, how much water would continue to flow over the Bala north and south falls, the remainder of the flow being directed through the proponent’s proposed hydro-electric generating station at the Bala falls.

The proponent:

• Determined the Committee’s members, speakers, and agenda.
• Used the meetings to unilaterally tell the Committee what the Flow Distribution would be.
• Produced the minutes without regard to disagreement from the committee on what was actually said.
• Claimed this meaningless farce was consultation.

As background, the flow over the Bala falls is sometimes called “Scenic Flow”, which denigrates its importance to the area’s tourist-driven economy.

• Did you know that by international agreement, half of the flow through the Niagara River must go over the Niagara Falls (rather than being through the Canada and US hydro-electric generating stations there) as it is is widely accepted how important tourism is to that area’s economy. The Bala proponent would allow only 6% of the flow to remain over the Bala falls.

Here is the problem …

1. The proponent’s commitments. As you can see from the proponent’s presentation at the final meeting of their Flow Distribution Committee, which was September 17, 2014:
   • Page 5: The proposed generating station’s minimum flow would be 14 m³/s (just as they committed in Section 6.2.2.1 of their 2009 Environmental Screening/Review report).
   • Page 9: They would provide greater “Concession Flows” over both Bala falls on six long weekends (such as the Canada Day long weekend) – as if these are the only important tourist times in Bala (what a misunderstanding of the local situation).
      
2. These commitments were final. As you can see from their September 30, 2014 Press Release, this is the “Final Scenic Flow Plan”, and they almost break their arm patting themselves on the back for these few days of Concession Flows.
    
3. But at the same time the proponent was providing conflicting information to the MNRF. On August 15, 2014 the proponent submitted this Water Management Plan Amendment to the MNRF. Note that:
   • Page 5: The new statement: “Concession Flows to be provided only when in-flows are available i.e. > 26 m³/s”.
     • The problem is that less than a third of summer days have flows of greater than 26 m³/s, so they usually would not actually provide these Concession Flows.
   • Pages 6 and 7: The new statement that the generating station’s minimum flow would be between 26 and 30 m³/s.
     • Note that the nearby Wilson’s Falls Generating Station caused the drowning of a 16-year-old boy in 2008, that station’s maximum flow was 10 m³/s.

So we now know that the proponent lied, as they told their Flow Distribution Committee:

1. They would provide additional flow over the Bala falls on long weekends, but at the same time they were telling the MNRF they would do this less than a third of the time.
2. Their generating station would have a minimum flow of 14 m³/s , but at the same time they were telling the MNRF the minimum flow would be between 26 and 30 m³/s.
   • So on the one-third of summer days when the proposed Bala generating station would start, without warning at about noon, the flow would be more than double that which is already known to have caused a drowning.
      

The Freedom of Information process
One of the few ways we have of knowing when the proponent lies is through the Freedom of Information process, where any member of the public can request internal government e-mails and other documents. There are two problems. Firstly, the process is expensive, often costing more than $1,000, depending on the number of documents and the time the government estimates it will take to gather them.

But the bigger problem is the proponent doing everything they can, at any expense, to delay and frustrate the process. Here’s the timeline of one request:

1. June 5, 2015. Submitted an FoI request for MNRF documents concerning this proposed project, from January 6, 2015 to June 2015.
2. June 17, 2015. Received fee estimate from MNRF of $1,420.
3. January and August 2016, received some documents. Some the MNRF reported they could not release for various privacy reasons.
   March 2016, proponent objected to the release of many documents which the MNRF had agreed could be released. This initiates a Mediation process through the Information and Privacy Commissioner of Ontario to determine whether these Contested Records should be released.
4. December 1, 2016. Proponent still objects to the release of the Contested Records. This initiates an IPC Adjudication process.
5. January 31, 2017. Proponent’s two lawyers at Loopstra Nixon LLP, Barristers & Solicitors submitted 55 pages of Representations to the IPC Adjudicator on why they claim the Contested Records should not be released, including a threat that the proponent will initiate legal action if the IPC orders these Contested Records be released and noting: “This would inevitably involve a significant expenditure in terms of legal fees and court resources.” The proponent even discloses they contemplated legal action in their communications with the MNRF. Threats, threats, threats.
6. February 24, 2017. IPC provides SaveTheBalaFalls.com with 47 pages of questions, instruction, and precedent giving us the opportunity to dispute the proponent’s claims.
7. March 7, 2017. SaveTheBalaFalls.com provides 84 pages of Representations (with some follow-up in May 2017) citing examples and precedents of why the proponent’s claims are not valid.
8. May 16, 2018. IPC Adjudicator provides 56-page Decision agreeing with us and the MNRF, and rejecting all of the proponent’s claims. The Decision orders that all the Contested Records be released no earlier than June 15, 2018 (giving the proponent a few weeks to initiate their threatened legal action) and no later than June 20, 2018 (as the MNRF sometimes takes months to get documents released).
9. Of special note is that the Adjudicator agreed to apply the “Public Interest Override”, finding that the benefit to the public of receiving the documents was more important than the need for secrecy claimed by the proponent.

The result is the documents requested through the Freedom of Information process are now more than three years old and we still don’t have all of them.

If this is how Tony Zwig wants to waste his daddy’s money, so be it. We’ll keep at it.

The proponent for the proposed hydro-electric generating station at the Bala falls committed for their environmental approval that: “any road closures be kept to a minimum and occur at times of least impact to the surrounding community.” For their final 2013 environmental approval, the proponent then updated this to state that even these closures would not be required.

Despite this, the proponent recently announced over 100 closures of Muskoka Road 169, and that these would be during daytime, twice a day, from at 9 am and 6 pm, for a half-hour duration each.

Now it gets even worse, the proponent is now blasting outside of those twice a day times, without any advance notification to the public.

The MOECC won’t enforce their environmental approval – apparently, if you’re building a generating station, anything goes.

• So next time you feel like blocking Muskoka Road 169, just say you’re building a generating station.
• While the proponent stated for their environmental approval they would not dump sand into the Moon River, they did this anyways and the MOECC wouldn’t stop it. So if you’d like to dump sand into lake, go ahead, just say you’re building a generating station.
• The proponent checked in the wrong place at their construction site for contamination, even though Polychlorinated Biphenyls (PCBs) would be expected to be found abandoned from the Bala #2 generating station which was demolished over 45 years ago, yet the MOECC allowed dumping all this excavated material and also dropping insecticide-laden shipping containers from China into the Moon River. So apparently, if you have some hazardous waste you’d like to get rid of, just dig a hole somewhere else and show there’s no pollution there, then dump whatever you’d like into the river. Just say you’re building a generating station.

Apparently we’re paying civil servants to cater to developers who have no respect or regard for the community or the environment.

The provincial government is demonstrating that we can abandon all common sense and that anarchy prevails. So encroach on other’s rights, harm the environment, anything goes, have at it.

Summary

The proponent for the proposed hydro-electric generating station at the Bala falls has no employees, no operations, and no income. This limits the proponent’s options to provide collateral for the construction financing they need.

The proponent considers their leases of land from both the Township of Muskoka Lakes and the Ontario Ministry of Natural Resources and Forestry as an asset they could pledge as collateral for their construction financing from lenders (which include the National Bank of Canada). The mechanism utilized to create this asset is a Demand Debenture which specifies the proponent’s leasehold interests as the Secured Property.

This Demand Debenture provides that if the proponent is in default of their construction loan payments, the lenders can demand payment of up to $60,000,000 with compound interest of 25% per annum. This remarkably high principal amount and interest rate seem to have been chosen to quickly deplete whatever equity the proponent claims they have in the proposed project, so that the lenders could gain full control of the proposed project within perhaps a year of the proponent defaulting on their financing obligations.

Ontario PC Party leader Doug Ford has recently stated that if elected Premier of Ontario, this proposed  project would be stopped (and we believe this could be done without cost or penalty to the province). It is therefore a real possibility the proponent could default on their financing obligations while they get busy suing everyone they can think of, we note the following:

• Articles on the proponent’s parent company’s 2015 lawsuit against the province of Ontario for their controversial and rightly-cancelled proposed wind turbine project near Thunder Bay are here and here (that lawsuit is actually for $60,000,000; as $10,000,000 for claimed development costs incurred and $50,000,000 for lost future profits).
• The proponent continues to maintain the $3,000,000 lawsuit they initiated in 2013 claiming defamation against the Township of Muskoka Lakes and others.

If the proponent went bankrupt or otherwise defaulted on their construction loan payments or other financing obligations, it is a valid concern whether the Township of Muskoka Lakes could incur legal or other costs or risks either due to this Demand Debenture or due to the Township’s lease of land to the proponent. For example, if construction was stopped, the Township’s Portage Landing would need much work to make the site safe, also the proponent’s lenders could sue the Township. The Township’s response to this liability concern that the proponent’s construction financing includes a Demand Debenture specifying Township land as Secured Property is: “the Township’s liability exposure is no different than that anticipated in the lease”.

While some may be comforted by the Township’s claim that the proponent’s Demand Debenture does not increase the Township’s liability, apparently the Township increased their liability exposure by leasing land to the proponent. This is certainly new information to the public, and likely to the Township Councillors as well. The Township Councillors apparently had extremely limited time and opportunity to review the Township’s land lease document before the Township Council vote that authorized the Township to execute the land lease. Apparently there was no advice provided to the Councillors that the Township would increase their liability exposure by signing this land lease.

This is a complex issue, and much depends on the exact wording of the relevant documents. For those interested in learning more and in seeing the relevant documents, the following is provided.
 

Detail

For their proposed project to construct a hydro-electric generating station at the Bala falls, the proponent obtained two land leases:

• For five parcels of land, from the Ontario Ministry of Natural Resources and Forestry.
• For three parcels of land, from the Township of Muskoka Lakes.

As the proponent pledging these land leases as collateral for their construction financing could create liability or other risk to the public, each of these land leases are discussed below.
 

MNRF Lease
From the Ontario Ministry of Natural Resources and Forestry, the proponent required a Construction Lease for their proposed construction site. This parcel of land is directly south of the Bala north falls, and was assigned Property Identification Number 48029-0635 by Ontario’s Land Titles system. Part of the MNRF’s strong motivation to facilitate this proposed project in every way possible is that for this Construction Lease, the MNRF are requiring the proponent to also lease three other parcels of nearby MNRF land, which are:

• Margaret Burgess Park (directly north of the Bala north falls, PIN was 48154-0623).
• The land between Purk’s Place and Muskoka Road 169 (PIN was 48029-0624).
• Diver’s Point (PIN was 48029-0630).

The MNRF also owns the strip of land to the west of Margaret Burgess Park and the Bala United Church, but the MNRF forgot to include this land in the Construction Lease, so the proponent has no rights to this parcel of land.

As presented here, the MNRF can provide several types of Crown land tenure; for a time the proponent had a Land Use Permit, and after that a Licence of Occupation, but what the proponent really wanted was a Construction Lease as that can be used as collateral for the proponent’s construction financing needs.

The reason why the MNRF is so eager to lease these parcels of Crown land is that the proponent would then become responsible for the following:

• Cutting the grass and cleaning up litter (though the Township of Muskoka Lakes currently does this).
• Evicting trespassers – as demonstrated by the proponent stating they would instruct the Ontario Provincial Police to arrest anyone using Margaret Burgess Park in 2015, including those attending the the Moon River Property Owners’ Association’s annual family-oriented Canada Day music, ice cream and fireworks event on this public land.
• Doing “minor” maintenance on the Bala north and south dams. The MNRF has spent years trying to “negotiate” this agreement, which is a farce as the MNRF has been desperately facilitating this proposed project in every way they can, and the proponent knows this, which doesn’t give the MNRF any negotiating strength. For example, while the proponent for the nearby Wasdell Falls generating station is responsible for all maintenance of that dam, the MNRF has proposed the Bala proponent only be responsible for “minor” maintenance, and the MNRF would remain responsible for “major” maintenance, with we taxpayers funding this. The definition of what constitutes “minor” and “major” is part of the MNRF’s negotiation.
• Operating the Bala north and south dams, so MNRF staff do not need to do this water level control.

The proponent spent years pursuing this Construction Lease from the MNRF. One reason this took so long is it required the proponent providing an official survey of the area, and this required resolving some historic property boundary and ownership issues (for example, the boundary of CP Rail’s property at the north shore of the Bala north channel included some of the riverbed as this land was flooded when the Bala dams were built in 1873, raising the water level of Lake Muskoka). There were also some property easements and infringements to be documented (such as the District Municipality of Muskoka’s buried water and sewer pipes that traverse the MNRF’s Diver’s Point, and the sidewalk on the south side of the Bala United Church which infringes on the MNRF’s Margaret Burgess Park to the south).

In 2017 these issues were apparently resolved to the satisfaction of the MNRF’s Office of the Surveyor General, and you can see the resulting extremely complex official Plan of Survey here, which is registered as Plan 35R-25482. The Survey defines 26 “Parts”, so that each easement and infringement can be separately documented. There’s a reason for every Part, for example, Part 1 includes the easement for the Bala United Church’s sidewalk, Parts 4 and 11 are the Bala north dam, Parts 7 and 14 include the easements for the District Municipality of Muskoka’s water and sewer lines buried across the Bala north channel, Part 16 is the proposed construction site, and Part 9 is the proposed tailrace excavation in the Moon River.

Apparently to extinguish some public rights and MNRF obligations, and for the Construction Lease, in 2013 the MNRF depatented the above four parcels of MNRF land. As shown in this Property Index Map, when the Survey was completed the MNRF grouped some of the Parts and created five new PINs, as follows:

• 48154-1188: Margaret Burgess Park and the north half of the Bala north falls to the south of it, including the north half of the Bala north dam.
• 48154-1189: The north half of the Bala north channel.
• 48029-0690: The proposed construction site, the proposed tailrace, and the south half of the Bala north falls to the north of this, including the south half of the Bala north dam.
• 48029-0691: The MNRF land to the west of Purk’s Place and the south half of the Bala north channel to the north.
• 48029-0692: Diver’s Point and the Bala south dam.

Ontario’s Land Registry system documents land ownership of every PIN through a land Parcel Register, and the printed version of this is called the Abstract. The Parcel Register Abstract for PIN 48029-0690 (which is the proposed construction site) is here. Of note:

• It is quite brief, as this PIN was created quite recently (November 23, 2017).
• The boundaries of the property are shown to be Parts 9, 10, 11, 12, and 16 on plan 35R25482, which is the Survey noted above.
• The Plan of Survey for this PIN was registered on August 11, 2017.
• A Crown Lease, with duration of five years and four months, beginning on September 1, 2017, for this land was registered to Swift River Energy Limited on November 24, 2017, and this is documented in Instrument MT192658. This is the Construction Lease from the MNRF, and it can be viewed here.
• On January 9, 2018, this Crown Lease was pledged (“charged”), with stated value of $60,000,000, as collateral towards construction financing arranged by the National Bank of Canada. This is documented in Instrument MT194353, which is a Demand Debenture for the Crown land, which can be viewed here.
• The “No Dealings Indicator” is set, which means that the property is not to be leased or sold, as there is already a lease registered against it.

Concerning the MNRF’s Construction Lease:

• It is for all five of the new PINs (48154-1188, 48154-1189, 48029-069, 48029-0691, and 48029-0692, as listed above, and shown on the Property Index Map above).
• This Construction Lease provides the proponent with the land tenure needed for the construction of the proposed project, up to the end of December 2022, or until a Waterpower Lease Agreement (WPLA)  is executed. A draft WPLA is included as Appendix A to this Construction Lease, and as noted in Section 13. of the Construction Lease, the WPLA would provide the proponent with land tenure for the operation of the proposed facility for an initial 30-year term with extensions in 10-year increments. The expectation is that the WPLA would be finalized and executed sometime before the proposed construction is complete.
• Section 2. (g) (iii) of the Construction Lease requires that the operation of the facility comply with legislation related to safety and the environment. This is of interest as we have not seen any evidence that the proponent could safely operate this facility.
• Section 2. (n) of the Construction Lease requires that heritage artifacts be: “identified, documented and preserved in accordance with Ministry of Tourism, Culture and Sport protocols”, however the proponent apparently has not done this for remnants of the Bala #2 generating station which their excavations have recently uncovered.
• Section 23. of the Construction Lease reserves the MNRF’s right to flood the leased land.

Concerning the Demand Debenture for the five parcels of leased MNRF land:

• The proponent, Swift River Energy Limited, has no employees, no operations, and no income. This Demand Debenture is the proponent’s method to use their lease for the five parcels of MNRF land as collateral for the loan they need to finance the proposed construction.
• Section 1.2 refers to an October 11, 2017 Credit Agreement between the proponent, the National Bank of Canada and other unnamed lenders. 
• Section 3.4 states that the payments specified by this Demand Debenture are only enforceable if the proponent does not fulfill the terms of that Credit Agreement.
• Schedule B identifies that the leases pledged as collateral are for both the five parcels of leased Crown land and the three parcels of leased land from the Township of Muskoka Lakes.
• Section 1.1 states that Swift River Energy will pay the National Bank of Canada and the other Secured Creditors up to $60,000,000 plus compound interest at the rate of 25% per annum. The purpose of this appears to be to quickly deplete the proponent’s claimed equity in the proposed project if the proponent defaults on their construction loan payments.
   

Township of Muskoka Lakes lease
To enable their proposed construction, the proponent leased three parcels of land from the Township of Muskoka Lakes (you can view the Township’s lease here):

• Portage Landing, which is the land directly south of the proposed construction site (PIN 48029-0679).
• The south half of the Don’s Bakery parking lot, also called the south half of the Portage Landing parking lot (PIN 48154-1077).
• The north part of the Precambrian Shield parking lot, this land is actually owned by the MNRF as it was created when the highway bypass was built in 1965, but the Township of Muskoka Lakes has a License of Occupation to use this as a parking lot (PIN 48029-0634).

The Parcel Register Abstract for the south half of the Don’s Bakery parking lot is here, this shows:

• The Township of Muskoka Lakes purchased this land for $160,000 on May 4, 2012.
• On December 14, 2017 the proponent registered a lease against this property, as Instrument MT193543, you can view this Notice of Lease here.
• Also on December 14, 2017 this lease of Township land was pledged, with a stated value of $60,000,000, as collateral towards construction financing arranged by the National Bank of Canada. This is documented in Instrument MT193544, which is a Demand Debenture for the Township land, which can be viewed here.

This Demand Debenture for Township land is identical to the Demand Debenture for the Crown land, the only differences are in the first two pages, due to the durations of the leases and the property descriptions.

Doug Ford has visited Bala to support us, it is now time for us to support Doug Ford
We have learned that the proposed project to build a hydro-electric generating station at the Bala falls is all about politics and not about what makes sense for Ontario, for example:

• Our article here shows that proposed renewable energy projects in Liberal ridings get cancelled, but those in PC ridings don’t.
   
• The environmental assessment process has been a farce, and after two months of waiting and after reminder e-mails, the Ministry of the Environment and Climate Change has still not responded to our letter noting that unsuspecting tourists would be “Murdered in 45 Seconds” (more detail in our article here).

As noted here, Doug Ford visited Bala on February 27, 2018 and stated if elected Premier, the proposed Bala project would be stopped. This doesn’t even have to cost Ontario, as all we need is for the MOECC to fulfill its mandate and protect human life by requiring the proponent to honour the commitments they made for their environmental assessment.

Last we checked:

• It is still wrong to drown unsuspecting tourists (the proponent could not adequately warn the public of the extreme dangers their proposed project would create, and the proponent refuses to show how they would even attempt to provide such warning).
   
• We still live in a democracy. It is time to use the power of our votes.

It is time to get political, and let the Progressive Conservative Party of Ontario know that if they’ll keep this commitment to stop the proposed Bala project, we’ll vote for them.

Your invitation is here for Doug Ford’s Unity Rally (a free event), which is this Monday March 19, 2018 at 7:00 pm to 8:00 pm (doors open at 6:00 pm), at the Toronto Congress Centre, 650 Dixon Road, Toronto, M9W 1J1 (you can listen Doug Ford’s invitation telephone call here).