Muskrat Falls — before the boondoggle
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.