Nfld. & Labrador

Former Muskrat champion says government, Nalcor to blame if there was wrongdoing

A former politician who once played a senior role with the Muskrat Falls project says government and Nalcor must shoulder the blame if there was wrongdoing.

Derrick Dalley says he believed oversight was sufficient, that Nalcor was 'extension' of his department

Former PC MHA Derrick Dalley, minister of natural resoures between October 2013 and November 2015, testifies Wednesday at the Muskrat Falls inquiry. (Terry Roberts/CBC)

A former politician who once played a senior role with the Muskrat Falls project told a public inquiry Wednesday that his  Progressive Conservative government and Nalcor must shoulder the blame if there was any wrongdoing.

Former MHA Derrick Dalley served as natural resources minister between October 2013 and November 2015, a critical and challenging period for Muskrat Falls. 

Like many in government at the time, he was an outspoken champion of the project, and repeatedly defended the level of oversight and scrutiny of Nalcor, both in the House of Assembly and in public.

Justice Richard LeBlanc is commissioner of the inquiry. (Terry Roberts/CBC)

But years later, with the project mired in cost and schedule overruns, and mounting evidence that Nalcor was reluctant to share critical information with its political leaders, Dalley is not so adamant in his defence of the Crown corporation.

'There's a level of accountability'

And when asked by Justice Richard LeBlanc on Wednesday who should be responsible if accurate and timely information was not provided to government, Dalley had this response:

"We have to take some responsibility, having made the decision and having went to the people of the province to support us to do it," Dalley said of the politicians in government at the time during testimony at a hearing in Happy Valley-Goose Bay.

The Muskrat Falls power station and other infrastructure is shown in a recent photo provided by Nalcor Energy. (Nalcor)

"Beyond that … there's also a level of accountability as well with respect to those people who were responsible to provide with us and tasked to deliver to us the information we needed."

We have to take some responsibility, having made the decision and having went to the people of the province to support us to do it.- Derrick Dalley

It was a notable moment in Dalley's testimony, and came after hours of questions about whether government did enough to test the reliability of Nalcor's 2012 capital cost estimate of $6.2 billion.

And it follows a forensic audit that revealed Nalcor knew early on the project was in trouble, but seemingly withheld information from politicians like Dalley and former premier Paul Davis, who also testified this week.

The cost has since soared to more than $10 billion, but jumps to $13 billion when financing and other charges are included. And first power is also delayed by at least two years for a project that was 96 per cent complete as of December.

Estimates are the problem: Learmonth

Dalley said he believed there was sufficient oversight, and referenced a list of reviews and reports carried out by government and Nalcor.

But commission co-counsel Barry Learmonth said it's now clear there was no truly independent review of Nalcor's cost estimates.

"Can you point to one study the government of Newfoundland and Labrador did to verify or analyze the capital cost estimates at DG3 of $6.2 billion?" asked Learmonth.

"No," Dalley replied.

Barry Learmonth is co-counsel at the Muskrat Falls public inquiry. (Terry Roberts/CBC)

And when government finally established an oversight committee in March 2014, in the wake of continuing criticism of Muskrat and rolling blackouts known as DarkNL, critics say it was too little, too late.

That's because government was locked into completing the project, regardless of cost overruns, once a $5-billion federal loan guarantee was signed in late 2013.

"We relied heavily on the work (Nalcor was) doing," said Dalley.

"We relied heavily on their facts and their work, believing we were on the same side."

Daley would have questions

A forensic audit of the construction phase of the project has revealed that early bids for various work packages came in $600 million higher than estimates.

Evidence also shows Nalcor's management team was forecasting a project cost of $7 billion by the summer of 2013.

These steel towers support the 1,100-kilometre Labrador-Island transmission line from Muskrat Falls to Soldiers Pond on Newfoundland's Avalon Peninsula. (Terry Roberts/CBC)

Both Dalley and Davis testified this week they only learned these details years later by reading the forensic audit, despite the fact both were members of cabinet at the time of project sanction, and Dalley was the lead minister on Muskrat when the final financing deal was inked in late 2013.

"I have no recollection of a number beyond $6.2 [billion]," Dalley said of the 2012-13 timeframe.

Dalley was also unaware that Nalcor's seven per cent contingency allowance for the project was at the low range, that a review of cost estimates in 2012 did not include a study of the strategic risks faced by the project, and that another study determined the chances of delivering first power on time at between one and three per cent.

When asked if all this information might have changed his support for the project, Dalley said, "It may have led to some more questions.… I couldn't say for sure."

Not too harsh on Nalcor

Dalley was careful not to overtly criticize Nalcor, or its former CEO, Ed Martin.

But like other politicians who have testified at the inquiry, he said politicians did the best they could, based on the information provided by Nalcor and senior government bureaucrats.

At one point, Dalley referred to Nalcor as an "extension" of the Natural Resources department.

"When I look back at our involvement, we relied very heavily on the people around us, and the departments to feed us information.… With Muskrat Falls I genuinely felt we were getting accurate information and we were making decisions in the best interest of the province and we were comfortable in doing that.

"They were our people," Dalley said of Martin and those leading the project. 

Ed Martin is the embattled former CEO at Nalcor Energy and considered the architect of the controversial Muskrat Falls hydro project. (Terry Roberts/CBC)

​When asked about his relationship with Martin, Dalley described the former CEO as "extremely confident" in 2014 and 2015 that he could get the project back on track, despite serious setbacks with contractor Astaldi Canada and the escalating cost.

"I found Mr. Martin to be very co-operative and engaging and available."

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About the Author

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

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