Muskrat Falls: Protests, soaring costs and the making of a 'boondoggle'

ST. JOHN’S, N.L. – Then-premier Kathy Dunderdale had a dismissive air when she rose in the legislature on Dec. 18, 2012, to answer another opposition question on Muskrat Falls.

Her Progressive Conservative government had just sanctioned the $7.7-billion hydro project, the largest publicly funded venture in Newfoundland and Labrador’s history.

It was a heady time for a province of 530,000 people — about the same as the Toronto suburb of Brampton — which was flush with oil riches and ambition. And a week before Christmas 2012, Dunderdale had little patience for skepticism.

“Mr. Speaker, this is a well-planned project,” she said.

One former provincial economist called Muskrat Falls a high-stakes gamble based on “voodoo economics.” Even Public Utilities Board reviewers said they hadn’t been given enough information to form an opinion about it.

No matter. The 824-megawatt development — which this month became a national flashpoint for indigenous rights — was touted as the cheapest option for required power, and Dunderdale was confident of success.

“We have imagined every scenario, everything that could possibly go wrong, and we have a remedy in case it does,” she said.

Supporters said the dam and powerhouse on the lower Churchill River near Happy Valley-Goose Bay in Labrador would free the province from volatile, oil-fired energy costs. Moreover, the joint deal with private utility Emera would bring power to the island of Newfoundland and then on to Nova Scotia, turning the region into a renewable energy powerhouse.

Dunderdale’s famously aggressive predecessor, Danny Williams, first championed the plan just before retiring from politics in late 2010. Muskrat Falls, he said at the time, would harness the province’s hydro potential while bypassing transmission hurdles through Quebec.

“Quebec will no longer determine the fate of Newfoundland and Labrador and one of the most attractive, clean energy projects in North America,” Williams said at the time.

Muskrat Falls was supposed to help ease the sting of a feud that has simmered in and out of court between the neighbouring provinces since the woefully lopsided Churchill Falls deal of 1969, which has seen Quebec reap more than $26 billion in profits, versus about $2 billion for Newfoundland and Labrador.

Former prime minister Stephen Harper even flew to Labrador in late 2012 to sign off on a federal loan guarantee, shaving millions of dollars off borrowing costs.

He arrived a few weeks before Dunderdale asserted in the legislature that project backers had every conceivable scenario handled.

Everything, it seems, but the crash of oil prices starting 18 months later. It gutted provincial finances as offshore oil revenues collapsed. It also played havoc with the original Muskrat Falls business case.

Bloating costs have exceeded even dire predictions.

Stan Marshall, who took over as head of Nalcor Energy, the Crown corporation spearheading the project, last spring after the new Liberal government criticized Muskrat Falls oversight, offered a startling update in June.

The estimated price tag, including finances, has now soared to $11.4 billion. First power, originally expected next year, isn’t scheduled until 2019. When asked if the project is a “boondoggle,” Marshall agreed, citing construction delays and “a major dispute” with Italian contractor Astaldi Canada.

“Right now, it is,” he told reporters at the time. “My task is to ensure in four years it will not be.”

Marshall said electricity rates for domestic customers will rise to about 21.4 cents per kilowatt hour by 2021, before tax. That’s up 6.3 cents from forecasts when Muskrat Falls was sanctioned, and almost double the 12 cents consumers paid last year — potentially adding $150 to an average monthly bill.

Marshall and Premier Dwight Ball said they’ll explore options to make prices more affordable.

Meanwhile, delays could be exacerbated by a growing blockade that is restricting access to the construction site.

Protesters have drawn support from across the province and country in recent days over concerns about methylmercury contamination. Nalcor has so far refused to fully clear the land that will be flooded to create a 41-square-kilometre reservoir.

The project is upstream from 2,000 Inuit and other residents in the Lake Melville region who rely on fish and seal meat. Nalcor says methylmercury — a neurotoxin linked to intellectual issues in children, heart problems and other issues — will likely increase between 2.3 and 4.8 times in the lower Churchill River before falling back to baseline levels over the next 15 years.

Harvard University research suggests risks could be lessened if trees and topsoil are cleared before flooding.

Protesters broke into the site Saturday night, and formed a blockade around it. Ball said in a statement late Saturday that Nalcor would do nothing to increase water levels until a meeting Tuesday with community leaders.

Todd Russell, president of the NunatuKavut Community Council representing Inuit-Metis in southern Labrador, said the growing dispute could have been avoided.

His group repeatedly urged the government in recent years to do full clearing as recommended by the joint review panel during environmental assessments, he said.

“They’re messing with the food on my table. They’re messing with the health of children, of elders and those who sit around the family table.

“This is a litmus test for reconciliation.”

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