Former CEO defends ‘good governance’ at Muskrat Falls overrun inquiry
Witnesses, commissioners describe lack of documents showing thorough review of cost estimates and project risks.
Ed Martin was head of Nalcor Energy until 2016, and was described by inquiry co-counsel Kate O’Brien as “gatekeeper” overseeing the Labrador dam that has doubled in costs to more than $12.7 billion.
The 824-megawatt hydroelectric dam on the lower Churchill River will send power to Newfoundland and later Nova Scotia through subsea cables. First power is expected next year, with full power available in 2020.
Martin’s testimony follows months of inquiry witnesses describing the years leading up to the 2012 sanction of the project, including an audit suggesting Nalcor understated the project’s risks.
Former government officials, expert witnesses and inquiry commissioners have described a lack of documents showing thorough review of cost estimates and project risks.
Martin’s week-long testimony is expected to address some of the gaps in communication on project planning that have been unearthed since the inquiry began its public hearings in September.
One striking moment on the witness stand earlier in the hearings came from Nalcor’s executive vice-president, Gilbert Bennett, who alleged that the company deliberately understated costs on at least one occasion before sanctioning.
Bennett told the inquiry that cost estimates were reduced to help Nova Scotia’s Emera Inc. _ which built the 170-kilometre subsea cable that will carry Muskrat Falls electricity to Cape Breton _ get approval from its provincial utilities regulator.
Emera’s participation was thought to likely increase the chances of landing the federal loan guarantee that project executives considered essential to sanctioning Muskrat Falls.
On Dec. 10, Martin defended his “good governance” of the project.
He responded to criticisms that the management team he personally hired to run Muskrat Falls mostly came from oil and gas backgrounds and lacked experience in hydro projects.
Martin also told O’Brien he could not guarantee all conversations he had with government officials and Nalcor board members were documented, and he considered verbal approval sufficient in some circumstances.
“Recording notes and writing things down and signatures, it was really from my perspective not something I was pursuing. But I knew enough to make sure that I was up front and I had alignment and agreement for key decisions,” Martin said.
Martin disagreed when O’Brien when asked whether he thought good governance practice entailed keeping a written record of all updates he provided to government.
Martin said he thought the oral updates he provided to government officials were good practice.
“I think what I was doing was good governance,” Martin said.
“I thought it was great governance practice to extend the information and make sure they were in the loop.”
Martin also responded to testimony from Nalcor’s chief financial officer, Derrick Sturge, who told the inquiry in October that he found the process “strange” and that he was frustrated with the lack of details around the pre-sanction project cost estimates.
Sturge said there were times when he felt “out of the loop” with what Martin was working on.
“It’s a big project, it’s a complicated organization, I’d say there were times that we were out of loop, you know, whether it was purposely or not it’s hard to know,” Sturge said when he appeared before the inquiry in October.
Martin told O’Brien Monday that he considered it Sturge’s responsibility to keep up-to-date on cost and schedule issues if he felt he was missing information.
“It’s not my job to keep him in the loop. If he’s not in the loop, go get in the loop. He’s the CFO of the company,” Martin said.
Martin’s testimony will continue throughout the week.
Former Newfoundland and Labrador premier Kathy Dunderdale will take the stand next week as the final witness in the first of three inquiry phases.
Hearing dates are scheduled until next August and a final report on the inquiry’s findings is expected in December 2019.