Welcome, minister. We have a problem. Summing up Siobhan Coady's dizzying intro to Muskrat Falls
Natural Resources Minister testified at Muskrat Falls inquiry Thursday
Within hours of being sworn in as a minister in the government of newly elected Premier Dwight Ball nearly four years ago, Siobhan Coady says she received an alarming phone call.
It was an early indicator that her tenure as Minister of Natural Resources would be more complicated than she might have imagined.
"I had concerns on multiple levels," Coady said, recalling her Dec. 15, 2015 phone conversation with Ed Martin, then-CEO of Nalcor, the province's embattled energy corporation.
And that's how Coady started off her testimony Thursday at the public inquiry that is investigating why the Muskrat Falls project is billions over budget and two years behind schedule.
Like other witnesses, Coady was grilled on a wide range of issues related to the troubled project. Despite what appears to be a stabilization of the cost overruns, and being the minister that oversees Nalcor, Coady made it clear that she should not be labelled a cheerleader for a project that threatens the province's already weak financial foundation, and has electricity users on edge over the prospect of soaring power bills.
"There may be benefits in time, once the project is paid down, but being the person that has been charged with having to find solutions to the challenge of having ratepayers pay for this project, I can tell you that I don't see those benefits today," Coady said during a tense exchange with lawyer Harold Smith, who represents Martin at the inquiry.
No mood to trumpet the project
The project is now 98 per cent complete, and first power is scheduled for later this year, but there is no clear strategy as to how the province will pay the massive mortgage on what is now a $13 billion project. And with the North American market for electricity at a low point, the promised windfall from energy sales outside the province is far from certain.
So as the government minister in charge of Muskrat, Coady was clearly in no mood to trumpet the project's perceived merits when she appeared before Commissioner Richard LeBlanc.
Instead, she described her dizzying introduction to the project when she arrived at the Natural Resources building on Elizabeth Avenue in St. John's in late 2015.
It came in the form of a phone call from Martin, whose congratulations were quickly overshadowed by a declaration that an urgent matter, one that would greatly impact the province's treasury, had to be addressed quickly.
Martin told Coady that the main Muskrat contractor, Astaldi, was in big trouble, was demanding hundreds of millions of dollars in extra payments, and he needed authority to negotiate a resolution.
The situation was above and beyond the massive cost estimates that were disclosed to the public a few months prior, Coady was told.
What's more, Coady said that through her questioning of Martin, she learned ousted PC premier Paul Davis was aware of the Astaldi chaos for months, but there had not been a resolution.
"That told me ... we didn't have a full picture of Muskrat," she said.
That phone conversation set in motion a chain of events that would eventually lead to the hiring of EY — an international professional services firm — to investigate Nalcor's handling of the project, the controversial departure of Martin, mass resignation of the board of directors, and the payment of an additional $800 million to Astaldi.
Coady said it quickly became apparent to the new government that there were problems at the Crown corporation, and that Martin did not have a coherent strategy to deal with Astaldi.
They had a tremendous amount of confidence in what they were doing. - Siobhan Coady
"We had concerns around the lack of information. The lack of diligence and presentation to us … it was a widespread theme that there was concern around the information being presented," she said.
And when EY revealed that Nalcor's cost and schedule estimates for the project were "unreasonable," the government decided to put tighter restrictions on Martin.
The premier, for example, ordered that officials from EY act as advisors on any negotiations with Astaldi, since Martin was attempting to re-write a billion dollar contract. This was resisted by Martin and his team, however.
EY also reported that Nalcor was resisting its involvement, and reported to government there was a "we know best" culture at Nalcor.
Coady said she encountered that culture as well.
"They had a tremendous amount of confidence in what they were doing … in how they presented information, and in what they felt was the outcome of the Muskrat Falls project," she said of Martin and his direct subordinates.
"And what we were learning was of course that was not the case. The case was that the cost and the schedule was not reasonable."
Budget blow up
The final blow up came on Apr. 14, 2016, budget day.
Then-finance minister Cathy Bennett scolded Nalcor in her budget speech, saying, among other things, that Nalcor's organizational structure, compensation and benefits packages had "grown beyond what taxpayers would consider reasonable."
Coady said she learned of Bennett's plan to criticize Nalcor the morning the budget was presented, and was not pleased she was not consulted.
An angry Ed Martin called Coady demanding a meeting with her and the premier.
In that meeting, Martin gave the premier an ultimatum: publicly support him, the leadership team and the project, or he walks.
Ball refused, and within a few days, Martin departed with severance and other entitlements that exceeded more than $6 million as per his contact. He was followed out the door by the entire board of directors, led by chairman Ken Marshall.
Martin was replaced by veteran utility company executive and engineer Stan Marshall, who received high praise from Coady Thursday, as she commended the former head of Fortis for his "clarity, transparency and directness."