Muskrat Falls — be­fore the boon­dog­gle

The Telegram (St. John’s) - - EDITORIAL - Pam Framp­ton Pam Framp­ton is a columnist whose work is pub­lished in The West­ern Star and The Tele­gram. Email pamela.framp­[email protected]­gram.com. Twit­ter: pam_framp­ton

Lis­ten­ing to top-rank­ing civil ser­vant Charles Bown at the Muskrat Falls in­quiry this week, this piece of tes­ti­mony stood out:

“There was also some pro­ject pres­sure, that there (were) cer­tain el­e­ments of the pro­ject that needed to get done and that we were on sched­ule for pro­ject sanc­tion to start at a cer­tain pe­riod of time, so we needed to stick to that sched­ule,” he said.

It sure sounds like some of the ex­pert re­views, plus the many hours of po­lit­i­cal de­bate that were to fol­low, were so much win­dow dress­ing, and that sanc­tion was as­sumed to be a done deal.

This week’s tes­ti­mony has been a litany of “we had to put our faith in Nal­cor,” “I as­sumed that if gov­ern­ment had needed to know…” and the oft-heard “I don’t re­call.”

And yet in the months be­fore the pro­ject was sanc­tioned, there seemed to be no as­sump­tions or wa­ver­ing — just bullish cer­tainty on the part of politi­cians.

At a De­cem­ber 2012 news con­fer­ence with re­porters, then nat­u­ral re­sources minister Jerome Kennedy was asked about po­ten­tial Muskrat Falls cost-over­runs by Cana­dian Press re­porter Sue Bai­ley.

Bai­ley: “But sir, just in gen­eral, how con­cerned are you that megapro­jects have a very bad habit of go­ing way over bud­get?”

Kennedy: “Look, I’m con­cerned that these big projects — I’ve watched Vale Inco, I’m watch­ing He­bron. OK? But we have to, at some point, trust the ex­perts. When we have Nal­cor, we have New­found­land and Labrador Hy­dro. We have Man­i­toba Hy­dro re­view­ing the pro­ject.”

Yet Kennedy tes­ti­fied this week that he was not privy to all of the in­for­ma­tion that ex­isted and he ac­knowl­edged that no gov­ern­ment depart­ment had con­ducted an in­de­pen­dent anal­y­sis of Nal­cor’s cost es­ti­mates for the pro­ject.

“If we made a mis­take here, we trusted Nal­cor,” Kennedy said.

Kennedy said he’d also trusted Bown to pro­vide him with the in­for­ma­tion he needed to un­der­stand pro­ject costs.

Bown, in turn, said he trusted Nal­cor.

What a vi­cious cir­cle.

The ul­ti­mate re­spon­si­bil­ity for this bil­lion-dol­lar mess, of course, lies with the pro­vin­cial gov­ern­ment’s elected of­fi­cials, not civil ser­vants.

You’d think the gov­ern­ment would’ve got­ten a hint that the pro­ject wasn’t such a great idea back when Fortis Inc. turned down a piece of the ac­tion. (The highly suc­cess­ful Fortis was, of course, then led by Stan Mar­shall, who would end up over­see­ing the Muskrat Falls pro­ject as CEO of Nal­cor once Ed Martin quit/was pushed out — which­ever it was).

“In the early days, we were in­vited — or inquiries were made, whether we’d be in­ter­ested in a mi­nor­ity sit­u­a­tion — and we said no…,” replied Mar­shall. “With­out go­ing into the mer­its of any pro­ject, we wished them well, but we do not get in­volved with mi­nor­ity sit­u­a­tions with Crown cor­po­ra­tions.”

Well, there was your red flag right there, as many peo­ple leery of Muskrat Falls rec­og­nized at the time.

As Bent Flyvb­jerg notes in “Megapro­jects and Risk,” gov­ern­ment on its own is not ef­fec­tive in en­forc­ing ac­count­abil­ity when it comes to mak­ing de­ci­sions on mega in­fra­struc­ture projects.

A bet­ter means of en­sur­ing ac­count­abil­ity and safe­guard­ing pub­lic money, Flyvb­jerg sug­gests, is to see if pri­vate fi­nanciers are will­ing to in­vest in the pro­ject and sup­ply the risk cap­i­tal. This way, he writes, “The com­mon prac­tice of trans­fer­ring the costs of un­cer­tainty to those who are in the weak­est po­si­tion to pro­tect them­selves is thereby, if not elim­i­nated, at least sig­nif­i­cantly re­duced.”

With Muskrat Falls, cit­i­zens trusted politi­cians to make the right de­ci­sions, just as the gov­ern­ment put its faith in Nal­cor. Yet it is in­deed those in the weak­est po­si­tion to pro­tect them­selves — ratepay­ers — who will carry the full bur­den of the con­sid­er­able risk.

As for Fortis? Well, back in 2010, it had 51 per cent own­er­ship in a 335-megawatt dam ex­pan­sion pro­ject in Bri­tish Columbia in part­ner­ship with Columbia Power Cor­po­ra­tion and Columbia Basin Trust.

Ad­mit­tedly, there are many dif­fer­ences be­tween the Waneta Ex­pan­sion and Muskrat Falls.

The most glar­ing? Pro­jected to cost $900 mil­lion, the Waneta Ex­pan­sion came in on bud­get and six weeks ahead of sched­ule in 2015.

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