Billions in benefits to come, Martin says
Former Nalcor Energy CEO makes recommendation on Churchill Falls
Newfoundland and Labrador needed to add new power generation and did the right thing in pursuing the Muskrat Falls hydroelectric project, according to former Nalcor Energy president and CEO Ed Martin.
From the witness stand, he warned the province against rushing into another hydropower deal, over fears of the costs of Muskrat Falls.
Martin was into his third day of testimony at the Muskrat Falls Inquiry on Wednesday. He continued to insist he did not see the numbers working out in favour of any energy option above the Muskrat Falls megaproject, with its dam on the lower Churchill River and associated transmission lines.
At one point, he was shown an excerpt from a presentation titled, “New benefits to N.L. at DG3” (being “decision gate three,” just before the project’s sanctioning by the corporation’s board of directors and the provincial government). He highlighted outside power sales, the return on equity built into project costs and more.
“Unfortunately, we’ve had cost overruns on Muskrat Falls. Substantial.
But what this information is telling us is that there is significant value that Muskrat Falls provides to the people, cash value, that can be used to adjust the rates, particularly in the shorter term, so that the burden on the people will be handled, while at the same time allowing the project to unfold and help us reap the tens of billions of dollars of benefit over the next 50 years,” he said.
Martin said the cost overrun on the project, “as unfortunate as it is,” can be handled. He said when the project is paid off down the road, the assets will continue to be useful in offering Newfoundland and Labrador both energy independence and a revenue stream from energy sales. Plus, he said, new transmission lines are offering added reliability to the local power system.
Sounding like he did when selling the project in 2012, he said the “future is bright.”
He also said the province and Quebec can sit “eye-toeye” for negotiations on the expiry of the contract governing the much more powerful and lucrative Churchill Falls hydroelectric property.
“For my money, to fool with that right now, because we are well positioned, would be absolutely crazy. We should hold the course, get the ratepayers taken care of, take advantage of the position we’ve put ourselves in and keep moving, and do not acquiesce to making any rash decisions right now with the Upper Churchill,” he said.
Martin spoke at length in response to questions from inquiry co-counsel Kate O’brien, who moved on to other questions central to the inquiry’s work. She asked what Martin understood and conveyed as the risks associated with the construction of Muskrat Falls.
Martin again confirmed he budgeted $0 for “strategic risk,” although he believed something would arise there. By definition, he noted, it couldn’t be foreseen by the Nalcor Energy project team. On his own viewpoint, he said the provincial government had agreed to cover the cost and that was the most important point.
“Speculating on unknowns is really just something I didn’t find of value,” he said.
In a series of questions on criticisms, Martin was asked about an email in 2011 where he wrote about the “bull----” flying around in the debate on Muskrat Falls, calling at the time for Nalcor Energy communications to ramp up efforts in support of the project.
He didn’t shy away from the comment.
“There was a tremendous amount of Muskrat Falls bullshit going on,” he said, specifically mentioning suggestions power rates would double given the project’s cost.
Later in testimony, on crossexamination, Martin was asked by lawyer Tom Williams about the value of the project in its current state.
Commissioner Richard Leblanc interjected, saying he did not need to hear comments on benefits again, or political commentary, although he would allow any new information relevant to the first phase of the inquiry — focused on the decision to pursue the project and its development up to the official sanctioning date at the end of 2012.
It was agreed Martin’s lawyer, Harold Smith, could raise the subject later if necessary.