Kathy Dunderdale was told $500M overrun worst-case scenario for Muskrat
Former premier stands by Nalcor and government officials for roles in project sanctioning
Former Newfoundland and Labrador premier Kathy Dunderdale says she pushed hard to find out what the real cost for Muskrat Falls might be prior to sanctioning the megaproject six years ago, and was told a $500-million overrun was a worst-case scenario.
"I have no reason, and had no reason, to distrust anything that Nalcor was saying to me," Dunderdale said during her first day of testimony at the public inquiry that is investigating the controversial project.
Muskrat was sanctioned at a capital cost estimate of $6.2 billion on Dec.17, 2012, and Dunderdale was assured by then-Nalcor CEO Ed Martin and others that it was a good estimate.
"I knew that nobody could guarantee me that the number was going to be $6.2 [billion], but I was assured that all the work had been done and that was as good a number as all of the analysis and expertise [that] had been applied to it could come with," she said.
And when Martin told her that it might hit $6.7 billion if some things didn't go as planned, Dunderdale didn't have a big problem with that.
"Nowhere along the line was anybody told, if it's more than $6.2 [billion] it's not going to happen. There was lots of cushion within the business case that we could easily have absorbed another $500 million," she said, referring to the 40 per cent of Muskrat power that would be used for export sales, and the return on equity from ratepayers.
But Dunderdale never imagined things would spiral out of control like they have.
Construction costs have now soared to at least $10.1 billion, with nearly $3 billion more for financing costs, and the first-power schedule of mid-2017 has been delayed until at least 2019.
There's widespread uncertainty about what the skyrocketing costs might mean for electricity rates in the province, and the inquiry is trying to determine whether Muskrat Falls was the best option for the province's future electricity needs, as Nalcor and political leaders like Dunderdale so forcefully argued at the time.
No joy in a failed project
Like others in government, Dunderdale did not see a report from Westney Consulting Group, an expert in risk assessment, that recommended Nalcor include a $500-million strategic risk allowance in its capital cost estimate. The same report also rated the chances of delivering first power on schedule at between one and three per cent, which would mean higher costs that were not factored into the estimates.
Under strenuous questioning from inquiry co-counsel Barry Learmonth, Dunderdale said she would have preferred to see that report, but refused to criticize Nalcor or any politicians or bureaucrats close to the project.
"I'm sure that what I needed to be told in terms of risk, that I was told."
If somebody had come to me, I can tell you this clearly, and said to me, we're on a P1 schedule, so this thing is going to be years late ... and it's going to cost billions of dollars more than the estimate, I can guarantee you, sir, there would be no Muskrat Falls with my name associated with it in any way.- Kathy Dunderdale
When pressed on the matter, Dunderdale offered this response:
"If somebody had come to me, I can tell you this clearly, and said to me, we're on a P1 schedule, so this thing is going to be years late ... and it's going to cost billions of dollars more than the estimate, I can guarantee you, sir, there would be no Muskrat Falls with my name associated with it in any way."
"There is no joy in having a failed project to your name," she added.
Because of the confidence expressed by Martin and others, Dunderdale said she believed the challenges associated with some risks had been addressed.
She highlighted the fact that hundreds of millions had been approved by government to begin early site work at Muskrat Falls, ahead of sanctioning.
But Learmonth, in an aggressive style that's become his trademark at the inquiry, suggested Dunderdale was "innocently" wrong about the cost estimate when she sanctioned the project to great fanfare six years ago.
Dunderdale said she'll wait to see what the inquiry finds to see whether that is accurate and that "I'm interested to hear an answer."
Dunderdale 57th witness
And Dunderdale refused to criticize Nalcor when Learmonth suggested Westney's report should have been disclosed to her prior to sanctioning.
"I'd be a lot happier sitting here today if I could recall a conversation that somebody said to me, this is Westney's report and this is their conclusion. And this is what we've done about it. But I can't recall that kind of precise conversation around this. I cannot," she said.
Dunderdale is the 57th witness to testify in public at the inquiry since hearings began in mid-September, and she could be on the witness stand until Thursday.