I didn’t question Muskrat Falls cost estimates, former premier tells inquiry
By Holly McKenzie-SutterProduction Energy Churchill energy hydro hydro megaproject manufacturing Muskrat Falls Nalcor Newfoundland
Kathy Dunderdale asserted "risk mitigation was a theme that moved through the whole discussion of the development of Muskrat Falls."
ST. JOHN’S, N.L.—The premier who sanctioned the controversial Muskrat Falls hydro megaproject in Newfoundland and Labrador says she had no inkling how excessively over-budget it would become.
“If they had said, ‘This thing is going to be years late and it is going to cost billions of dollars more than the estimate,’ I can guarantee you, sir, there would be no Muskrat Falls with my name on it,” former premier Kathy Dunderdale told the inquiry into cost overruns Monday.
“There is no joy in having a failed project to your name.”
The 824-megawatt hydroelectric dam has essentially doubled in costs to more than $12.7 billion, and the inquiry has heard from dozens of witnesses, some of whom have suggested the risks had been intentionally downplayed.
Taking the stand for the first time Monday, Dunderdale said she had no reason to question what she was being told by executives of Nalcor Energy, the Crown corporation overseeing the Labrador project.
She said she did not consider it necessary to ask government staff to separately review and verify Nalcor’s work.
“We hired these people … to do this work on our behalf, and until I had a reason to believe they weren’t doing that in a responsible and comprehensive way, I don’t know (why) I would ask somebody else to double check their work,” she said.
She said she understood the cost overruns could reach hundreds of millions, not billions.
In his questioning of Dunderdale, inquiry co-counsel Barry Learmonth asked whether she felt the government had a responsibility to look at the numbers with extra scrutiny.
“You’re the government, you’re in charge of protecting the people’s money,” Learmonth said.
“Don’t you acknowledge there’s a strong obligation of the government in this situation to provide oversight over Nalcor, not simply to accept what they’re telling you?”
Dunderdale said her government provided more oversight of Nalcor than other Crown corporations, but she had no reason not to trust Nalcor.
She also suggested that Stephen Harper’s federal government “thoroughly reviewed” the business case for Muskrat Falls, based on the federal loan guarantee that was signed between the two governments before sanctioning.
“I was told they were doing analysis, but I wasn’t there,” Dunderdale said.
First power from Muskrat Falls is expected next year, with full power available in 2020. The dam on the lower Churchill River will send power to Newfoundland and later Nova Scotia through subsea cables.
In 2012, Dunderdale announced Muskrat Fall’s sanctioning with a celebration at the Confederation Building in St. John’s, speaking to the “lasting benefits to the people of Newfoundland and Labrador.”
Since the inquiry began in September, witnesses have raised red flags about early analysis of project risks, and information shared with the public.
High-ranking advisers working for Nalcor have suggested that certain cost estimates were intentionally suppressed to secure Nova Scotia’s Emera as a partner.
Dunderdale’s government hired Manitoba Hydro International (MHI) in the pre-sanction period to review Muskrat Falls. The former premier pointed to MHI’s work as an independent set of eyes supporting the project’s go-ahead.
Earlier this fall, the inquiry heard from three men who worked on the MHI analysis who testified that a strategic risk analysis was not done because the requirement was removed by government—something Dunderdale denied prior knowledge of when questioned by Learmonth on Monday.
“I (was) not aware until very recently that MHI was asked to remove risk analysis … but I can say to you that a great deal of time was spent discussing risk,” she said.
“Risk mitigation was a theme that moved through the whole discussion of the development of Muskrat Falls.”
Learmonth also asked Dunderdale whether she was concerned that former Nalcor CEO Ed Martin did not clearly present her with a report on risk of possible schedule overruns and associated costs.
Dunderdale said she couldn’t recall exactly which reports were discussed, saying she might have had a conversation about it and forgotten the details, and she did not agree with Learmonth’s suggestion Nalcor intentionally suppressed costs to get the project sanctioned.
Dunderdale said she would not have treated Nalcor’s reports any differently from reports coming from her finance department.
She said Nalcor was created to undertake energy development work in the province, in areas where government lacked expertise—although the company has been criticized for appointing executives with oil and gas backgrounds and no prior experience in planning a hydro project.
Dunderdale’s testimony will continue throughout the week.