Commissioner Scorches Newfoundland’s ‘Blind Trust’ in Troubled Muskrat Falls Megaproject

Newfoundland and Labrador Premier Dwight Ball is calling in the police and the provincial justice department, following the release of a scathing report last week that found a previous provincial government failed to protect residents’ interests during construction of the 824-megawatt, C$12.7-billion Muskrat Falls hydro megaproject.

By assuming the dam had to be built no matter what, then placing “blind trust” in the leadership team at Nalcor, the Crown corporation overseeing the project, the province “failed in its duty to ensure the best interests of the province’s residents were safeguarded,” wrote provincial Supreme Court Justice Richard LeBlanc, head of an inquiry into the deeply troubled project.

Nalcor “exploited this trust by frequently concealing information about the project’s costs, schedule, and risks,” he added.

“The megaproject’s costs have essentially doubled since it was sanctioned in 2012 under a previous Progressive Conservative government,” The Canadian Press writes. “It now accounts for about a third of Newfoundland and Labrador’s considerable debt and has been referred to as a ‘boondoggle’ by Nalcor’s current CEO, and the province’s ‘biggest fiscal mistake’ by its current premier.”

Once the project begins transmitting electricity to Newfoundland and eventually Nova Scotia via underwater cables, “it’s set to produce more power than the province needs and its financial structure, which Ottawa has agreed to reconfigure, would leave electricity ratepayers to pay for the extra costs through their monthly bills.”

In his six-volume report, LeBlanc questioned the assumption that Muskrat Falls was the least-cost electricity option for Newfoundland and Labrador ratepayers, CP says. “He wrote that the project’s economics were not sufficiently tested and that Nalcor failed to consider all potentially viable power options,” and called out former CEO Ed Martin and other company executives for “unprincipled steps to help secure project sanction”.

He contended that they concealed information that could have weakened the case for the project, including a 2013 risk analysis by SNC-Lavalin that added a possible $2.4 billion to Nalcor’s previous calculations.

LeBlanc also concluded that “government and Nalcor officials failed to research well-known risks related to megaproject cost and schedule runs, writing that ‘their failure to do this is indefensible’,” the news agency adds. The commissioner “wrote that Martin fostered a culture of superiority within the project’s inexperienced senior management team, which regularly ignored the advice of more knowledgeable individuals, and that executives took advantage of government officials’ lack of knowledge about hydro projects.”

While he faulted the government for providing insufficient project oversight, LeBlanc said there was “no doubt” that Martin “must be faulted for intentionally failing to disclose…relevant information on costs, schedule, and risk”.

The commissioner also concluded that the province “did not act appropriately” on environmental and health concerns raised by Indigenous communities, provoking “an environment of mistrust” that led to protests and further delays. “Even today,” he wrote, the government “has failed to ensure that its commitments, and those of Nalcor, regarding environmental matters related to the project are being properly tracked, monitored, and acted upon.”

Among LeBlanc’s 17 recommendations, CP cites his call to limit Nalcor’s ability to withhold information on legal or commercial grounds, and for the government to engage independent experts and provide “well-defined” oversight on any projects worth more than $50 million.