N.L. budgets $33.7 million for inquiry related to cost of Muskrat Falls hydro project

The government of Newfoundland and Labrador (N.L.), Canada, will spend millions in 2018-19 investigating the escalating cost for completing the 824-MW Muskrat Falls hydropower project.

In addition to nearly $724 million in funding allocated for project completion, the official 2018 N.L. Budget released today also allocates more than $20 million and an additional $13.7 million in 2019 to support an independent inquiry, led by Canadian Supreme Court Justice Richard LeBlanc.

N.L. Finance Minister Tom Osborne, in his budget speech delivered in the House of Assembly today, said, “Under the terms set by the previous administration, we are once again required to make an equity investment in Nalcor Energy. This year, that investment totals $723.9 million and will support the completion of the Muskrat Falls Project, which is close to 90% complete.”

Based in St. John’s, N.L., Nalcor Energy is a provincial Crown corporation founded in 2007 and is developing Muskrat Falls through its subsidiary, Hydro.

The inquiry, according to Osborne, will provide a greater understanding of what led to the previous administration’s sanctioning of the Muskrat Falls project. It will also seek why budgets increased from an estimated $6.2 billion in 2013 to the $12.7 billion projected today, as well as why the schedule for completing the plant was consistently underestimated.

The previous administration to which Osborne makes reference was headed by Premier Paul Davis, who served from Sept. 26, 2014, to Dec. 14, 2015.

Local N.L. media report LeBlanc will examine issues around the sanctioning of the project, such as whether Nalcor’s forecasts and assumptions were reasonable. The investigation will also examine Nalcor’s execution of the project and why the N.L. Public Utilities Board was exempted from conducting a full review.

The inquiry began in January and the final report is due Dec. 31, 2019. Currently, Muskrat Falls is scheduled to deliver full power in 2020.

In 2017, HydroWorld.com reported Davis’ successor and current N.L. Premier, Dwight Ball, said a formal examination was necessary because a mere audit would be inadequate into determining why the cost of the Nalcor Energy-owned plant continues to rise.

The inquiry must also consider participation of indigenous groups and the need to provide consumers with electricity at the lowest possible cost with reliable service. It may also engage special technical financial, engineering and construction expertise.

Osborne said, “To address concerns regarding the health and well-being of the people of Labrador as related to the Muskrat Falls project, our government continues to work closely with Innu Nation, Nunatsiavut Government and the NunatuKavut Community Council.

“Budget 2018 will provide approximately $53,000 for a position dedicated to working with the Independent Expert Advisory Committee, which was established to make recommendations on mitigating potential impacts of methylmercury from the Muskrat Falls Project.”

Muskrat Falls has sparked controversy throughout its development, though multiple studies have defended it as the least-cost option for future power generation in the province.

The Canadian federal government announced it would provide a further $2.14 billlion in loan guarantees for the project in November 2016.

The plant will be located on the Churchill River in Labrador downstream from the existing Churchill Falls plant and is one component of the Lower Churchill complex that could eventually include the 2,250-MW Gull Island plant.

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