Nfld. & Labrador

Jerome Kennedy admits to anger after finding out all the facts on Muskrat Falls

He was Natural Resources minister when Muskrat Falls was sanctioned. But he testified Monday he wasn't told of all the issues surrounding the project's costs.

Former Natural Resources minister says he was unaware of some costs, timelines with hydro project

Jerome Kennedy was minister of Natural Resources when the controversial Muskrat Falls hydroelectric project was sanctioned in 2012. (Terry Roberts/CBC)

Jerome Kennedy admitted Monday to anger and disappointment after discovering he wasn't told about some Muskrat Falls costs and timeline issues prior to its sanctioning in 2012 — a time when he was publicly drumming up support for the megaproject.

It was an astonishing admission during his testimony at the public inquiry investigating the controversial project, from the man who at that time was minister of Natural Resources, the department tasked to oversee government-owned Nalcor Energy.

"Every day I was out there in the public defending a project based on the information that's given to me, by people I have no reason to believe won't give me accurate information," Kennedy testified.

Kennedy learned of these risks during a meeting with lawyers for the public inquiry in the summer of 2018, and through the findings of Grant Thornton's forensic and investigative audit of the decision to sanction Muskrat.

I felt surprised. I felt disappointed. I felt a certain degree of anger.- Jerome Kennedy

"When it really hit me sir, was during the interview, when you pointed these things out to me one after the other. I felt surprised. I felt disappointed. I felt a certain degree of anger too, sir," he said.

'Unpleasant meetings'

Kennedy was also unaware that Nalcor was massaging and editing parts of the independent reviews to remove some commentary that might be critical of the planning, and testified there would have been "unpleasant meetings" if he had known at the time.

When presented with a series of emails exchanged between Nalcor and government officials in the lead-up to project sanctioning, Kennedy described the dialogue as "totally inappropriate," and added, "I"m bothered by these kinds of emails."

The construction of Muskrat Falls is more than 90 per cent complete, with first power forecasted for late 2019. (Nalcor)

Kennedy added he would have "conversations that would not have been polite" if he had seen the emails, and acknowledged the relationship between Nalcor and government officials in his department was "too close."

'We should have been aware'

Kennedy's testimony is the latest evidence that politicians and senior bureaucrats were not entirely in the loop when it came to how Nalcor was planning Muskrat Falls.

The fact that an independent risk assessment consultant had recommended Nalcor include a half-billion-dollar strategic risk allowance in its capital costs estimates, for example, was not known for Kennedy.

Anything that increased the cost of Muskrat Falls... is something we should have been aware of.- Jerome Kennedy

"Anything that increased the cost of Muskrat Falls... is something we should have been aware of."

That Nalcor was taking a risky approach to its costs and schedules, in defiance of a recommendation to be cautious, was also unknown to Kennedy.

For example, Nalcor switched from a 75 per cent probability that its cost estimates would be accurate to a 50 per cent probability in 2010. That's despite the fact external consultants were recommending at least a P75 rating, which would have added hundreds of millions to the cost estimates.

Nor was he aware that the 2017 schedule for first power was practically impossible to achieve, according to one report that Kennedy never saw.

Ed Martin, the former president and CEO with Nalcor Energ, will testify next week. (Terry Roberts/CBC)

"This is something that I should have been aware of," Kennedy said in response to questioning from Barry Learmonth, inquiry co-counsel.

Kennedy was a loud supporter of the project during his time in politics, and said he believed in the information being provided by Nalcor.

"I never found Mr. Martin at any time to be misleading me or anyone else," Kennedy said of former Nalcor CEO Ed Martin.

Since it was sanctioning, the cost for Muskrat has soared from an initial estimate of $6.2 billion to an all-in cost of $12.7 billion.

And first power is delayed until at least next year, more than two years behind schedule.

Martin, meanwhile, will testify at the inquiry from Dec.10-14.

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