Nfld. & Labrador

A stinging audit and a rebuttal: What the Muskrat inquiry's Labrador stop revealed

The Muskrat Falls inquiry will resume in St. John's on Monday, with former premier Danny Williams in the witness stand. Here's a look at some of what happened when the inquiry convened in Labrador.

Danny Williams to testify Monday as commission shifts to St. John's

Nalcor Energy CEO Stan Marshall gave a presentation during the early days of public hearings into the Muskrat Falls commission of inquiry. Here he's seen chatting with commission co-counsel Kate O'Brien (left). In the background is Dan Simmons, the lawyer for Nalcor at the commission. (Terry Roberts/CBC)

The analogy might be in poor taste, but those closely following the early proceedings of the Muskrat Falls public inquiry may have a better understanding of what it might be like to be downstream of a dam break.

A flood of information, much of it very technical.

That was certainly one of the realities as the commission held seven days of hearings in Happy Valley-Goose Bay, the first of more than 100 hearing days as the inquiry tries to determine why the massive and complex hydroelectric project went so wrong.

There was the release of a stinging audit by Grant Thornton into the decision to sanction Muskrat Falls, and countless other evidence and exhibits, including third-party reports from companies with names like Navigant and Manitoba Hydro International.

What's your cumulative present worth?

There was the frequent use of specialized terms such as cumulative present worth, price elasticity, planning load forecasts, internal rates of return, and macro-economics.

Hours and hours of surgical cross-examinations by lawyers, auditors from the defence, energy experts from Nalcor explaining why Muskrat Falls was the favoured option, and those watching the proceedings from a distance trying to take it all in as it's livestreamed over the internet.

Three experts from Nalcor Energy who played a role in gathering and assessing the information used to sanction Muskrat Falls were witnesses at the public inquiry in Happy Valley-Goose Bay. They were, from left, Paul Stratton, Bob Moulton and Auburn Warren. (Terry Roberts/CBC)

This and more played out over a week-and-a-half of hearings at the Lawrence O'Brien Arts Centre, concluding on Wednesday a full day ahead of schedule.

Options 'inappropriately' eliminated

But it was that audit, the first of two being prepared by Grant Thornton, that raised eyebrows, questioning whether Muskrat Falls was the least-cost option.

It had critics proclaiming vindication when it was released Sept. 21.

Scott Shaffer (left) and David Malamed of Grant Thornton appeared before the Muskrat Falls inquiry in Happy Valley-Goose Bay. (Terry Roberts/CBC)

It included a suggestion Nalcor may have "inappropriately" eliminated two options for the supply of electricity to the province, and "further analysis of these options may have led to a different decision" than Muskrat Falls.

Nalcor may have "inappropriately" eliminated two options for the supply of electricity … and "further analysis … may have led to a different decision … "

That the advantages of the Muskrat Falls option may have been overstated, and, as one critic put it, therefore "injuring" to the option of maintaining the island's isolated power grid.

That Nalcor was overly optimistic in the future demand for electricity, and used economic forecasts from the provincial government that were much rosier than similar forecasts from other sources.

The audit also questioned Nalcor's aggressive cost estimates, which came with a 50 per cent probability factor that they would be accurate.

The audit's release was followed by several days of cross-examination of the two men who led the review, Grant Thornton's David Malamed and Scott Shaffer.

Harold Smith, Ed Martin's lawyer, asked some pointed questions of auditors David Malamed and Scott Shaffer at the inquiry on Tuesday, Sept. 25. (Terry Roberts/CBC)

While the auditors mostly stood their ground, there were moments when the lawyers for Nalcor and Ed Martin scored points, soliciting comments likes "I can see how it could be confusing" and "the assumption we've included is incorrect."

No costs revealed

It was the early stages of a very public investigation into the decision to build the Muskrat Falls hydroelectric project, and the subsequent cost and schedule overruns that has ignited so much angst throughout the province.

The fact it's a public inquiry means taxpayers are footing the bill for a group of lawyers and commission staff that could nearly fill a school bus.

That doesn't include the hired experts like Grant Thornton, or the cost of Ottawa-based historian Jason Churchill, who prepared a report on the history of hydro development on the Churchill River, and the Oxford professor who spoke about the risky business of building hydro dams.

Historian Jason Churchill is an expert on hydroelectric development negotiations on the Churchill River. He gave a presentation Wednesday to the Muskrat Falls inquiry during a public hearing in Happy Valley-Goose Bay. (Terry Roberts/CBC)

Transparency is one of the guiding principles of the inquiry, and the contracts for the auditors and others are available on the inquiry's websites. But the costs? They're redacted.

Competing views from the sidelines

Meanwhile, it wasn't just the scene on stage at the arts centre in Happy Valley-Goose Bay that was noteworthy.

This inquiry has the potential to ruin reputations, which means there's a lot on the line for those who championed the project, including the man referred to last week as the Muskrat Falls "gatekeeper," former Nalcor boss Ed Martin.

Each day, Martin took his seat in the public gallery, eyes fixed on the proceedings. Willing, eager even, to share his thoughts with the media.

"I encourage people to try to avoid people who are negative on this project who suggest vindication," Martin said Wednesday.

Former Nalcor Energy CEO Ed Martin remains steadfast that the Muskrat Falls project, despite a stinging audit, was the best option for Newfoundland and Labrador. (Terry Roberts/CBC)

Martin left Nalcor under a cloud in 2016 after the Liberals and Premier Dwight Ball swept the Progressive Conservatives from power.

He has watched from a distance ever since as his successor, Stan Marshall, labelled Muskrat Falls a boondoggle, and Ball routinely refer to the project as a "massive wrong" and the worst financial mistake in the province's history.

Don't rush to judgment: Ed Martin

Despite this, Martin disagrees that Muskrat Falls, which has pushed the province's already burdensome debt situation to the breaking point, will be a stain on his legacy.

"My advice to people is don't make early assessments," Martin said. "Listen to the data. Listen to the facts that are coming out."

Those negative people referred to by Martin?

Members of the Muskrat Falls Concerned Citizens Coalition, a newly incorporated group comprised of outspoken critics of the project, including Des Sullivan.

Des Sullivan is an outspoken critic of the Muskrat Falls megaproject, and a member of a concerned citizens coalition that has standing at the commission of inquiry looking into the project. (Terry Roberts/CBC)

Sullivan was breathing the same air as Martin this week inside the arts centre. And like Martin, more than happy to voice an opinion on the proceedings, and the project.

"The province is in significant peril because an unwise project was allowed to proceed and be poorly managed and result in a debt level of $12.7 billion, which cannot be sustained any way you define it," Sullivan told CBC.

Danny Williams to testify on Monday

This current phase of the inquiry is focusing on the decision to sanction Muskrat Falls, or the period from late 2010 until official approval by then-premier Kathy Dunderdale on Dec. 17, 2012.

The cost overruns and construction delays would come later.

The project was sanctioned with an estimated capital cost of $6.2 billion, not including financing charges. And first power was supposed to flow in July 2017.

But the capital costs have grown to $10.1 billion, with an all-in cost of $12.7 billion.

As for the schedule, today first power is not expected until late 2019, with full power a year later.

Former premier Danny Williams will be a witness at the commission of inquiry into Muskrat Falls in St. John's on Monday and Tuesday. (CBC)

There are still plenty of questions left to be answered, and that process will continue next week when hearings resume in St. John's.

Scheduled to take the witness stand on Monday morning? Former premier Danny Williams.

He's scheduled to give two days of testimony.

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About the Author

Terry Roberts is a journalist with CBC's bureau in St. John's.