Nfld. & Labrador

Kathy Dunderdale defends Nalcor, undermines former colleagues in Muskrat testimony

Former premier Kathy Dunderdale voiced support for Newfoundland and Labrador's embattled energy corporation, while challenging the memories of her former political colleagues during sometimes tense testimony at the Muskrat Falls inquiry Tuesday.

Former premier says she was aware of 2013 cost increase on project, and believes she told cabinet

Kathy Dunderdale, Newfoundland and Labrador's premier when Muskrat Falls was sanctioned in 2012, and when a federal loan guarantee was finalized a year later, testified for a second time Tuesday at the public inquiry. (Terry Roberts/CBC)

Former premier Kathy Dunderdale voiced support for Newfoundland and Labrador's embattled energy corporation while challenging the testimony of her former political colleagues during sometimes tense testimony at the Muskrat Falls inquiry Tuesday.

"They weren't trying to hoodwink me. They weren't trying to pull the wool over my eyes," Dunderdale said when inquiry co-counsel Barry Learmonth suggested the provincial government's oversight of Nalcor Energy was "weak, feeble and limited" and that Nalcor "on a repeated basis intentionally withheld relevant information."

"I am not convinced that Nalcor withheld information and buried information so it could never be found out by government. I don't believe that to be true," said Dunderdale, despite evidence that reports identifying serious risks to the project were never shared with the government by Nalcor.

And in a surprising twist to what's become a very tangled issue at the inquiry, Dunderdale acknowledged she was aware of a sharp — and until recently, never publicly disclosed — increase in the capital cost for Muskrat Falls in late 2013, as the financing arrangement for the project was finalized.

Her admission put her at odds with some of her cabinet ministers from that era, and even the province's top public servant at the time, current auditor-general Julia Mullaley.

Barry Learmonth, co-counsel at the Muskrat Falls inquiry, suggested the provincial government's oversight of Nalcor Energy was 'weak, feeble and limited.' (Terry Roberts/CBC)

Though she couldn't recall a specific time or place, and there's no documentation to back up her claim, Dunderdale says she believes she passed information about the increased cost along to her cabinet at the time.

"I would have," Dunderdale said.

"Do you remember" doing that? Learmonth asked.

"I don't remember, but I would have," she insisted.

At odds with her ministers

It was a notable moment in a long day of testimony for Dunderdale, who played a key political role in Muskrat Falls for years — either as minister of natural resources or premier — prior to her sudden departure from political life in January 2014.

The inquiry is currently focused on the question of why there have been massive cost and schedule overruns, with the capital cost soaring from $6.2 billion at sanctioning in 2012, to the current figure of $10.1 billion. With financing and other costs included, the cost grows to nearly $13 billion.

But one particular number — $300 million — has dominated recent testimony, with contradictory evidence about who was in the loop, who was kept in the dark, and whether, in fact, it was an actual increase to the capital cost.

It all revolves around a key milestone in the project in December 2013, when the province celebrated the signing of a loan guarantee, with the federal government co-signing for the billions being borrowed by Nalcor in order to qualify for a more favourable interest rate.

The finance agreement with Ottawa identified a capital cost of $6.531 billion, roughly $300 million more than the amount announced at sanctioning a year earlier.

This amount was disclosed to the public only through the findings of the inquiry, and key people in Dunderdale's cabinet, including then-finance minister Tom Marshall and then-natural resources minister Derrick Dalley, have testified they were unaware of the higher number at the time.

'Dupes of Nalcor'

Mullaley, who was clerk of the executive council, is also expected to testify that she was in the dark.

Meanwhile, evidence shows some bureaucrats in the finance and natural resource departments were aware, and Dunderdale seized on this latter point.

Learmonth asked Dunderdale if she had any explanation for the fact that Dalley, Marshall and former premier Paul Davis said they didn't know about the increase.

"No more than I have an explanation as to why their officials, knowing there had been a change, regardless of the amount, had not told them," said Dunderdale.

The issue is getting attention because Learmonth and others believe it's part of a pattern by Nalcor to deliberately withhold information from government, with Learmonth at one point saying Dunderdale and others were "dupes of Nalcor." 

Dunderdale leaves the hearing room following a long day of testimony at the Muskrat Falls inquiry Tuesday evening. (Terry Roberts/CBC)

Dunderdale added to the intrigue on the $300-million controversy, testifying she believes she was told by former Nalcor CEO Ed Martin about the higher amount, and that Marshall and Dalley would have been told in a cabinet meeting.

I can tell you that searching through every memory bank I have, my strong recollection is that I knew.- Kathy Dunderdale

"I can't tell you how much time I have spent  in the last couple of weeks, beating that question around in my head," she said. "I can tell you that, searching through every memory bank I have, my strong recollection is that I knew," she said.

"If you knew, isn't it obvious you would have reported that information to the other cabinet members?" Learmonth asked.

"Absolutely," said Dunderdale.

But there's no documentation backing up Dunderdale's belief that she informed cabinet, or even that she was told by Martin, because it's now clear that note-taking was, in many cases, discouraged because of a fear that sensitive information would be leaked.

And Dunderdale said she was told by Martin that an additional savings of $300 million through the loan guarantee had been identified, and this "offset" was "keeping me calm."

'Don't like being at odds'

She defended the decision not to release the $6.5-billion figure to the public because Nalcor was tendering billions in contracts at the time, and didn't want to "cloud the bidding process" by signaling to contractors the project budget had gone up.

Martin did indicate at the time there were "pressure points" on the project, and a revised budget of just under $7 billion wasn't released until June 2014.

"I don't like being at odds with former ministers and public servants. It's not a comfortable position," Dunderdale admitted.

But, she added, "If I knew, my cabinet knew. There's no way that I would know and not tell my cabinet. There's no way I would know and my ministers not know."

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