Jerome Kennedy defends deputy when pressed over Muskrat risk disclosure debate
Charles Bown was a deputy minister and government’s primary liaison with Nalcor
The lawyer for Nalcor Energy suggested Jerome Kennedy might have been let down by one of his deputies in the lead-up to sanctioning of Muskrat Falls six years ago.
But the former minister of natural resources refused to criticize Charles Bown, who was a deputy minister with the department and government's primary liaison with Nalcor when planning for the controversial project was at its peak.
"Mr. Bown was very diligent in terms of what he did. If he was aware of it he would have certainly; my expectation is he would have brought these issues to our attention," Kennedy testified Tuesday during his second day on the witness stand at the Muskrat Falls inquiry.
Kennedy made the comment under cross-examination from Dan Simmons, lawyer for government-owned Nalcor.
Kennedy 'surprised' by evidence
Kennedy made headlines Monday when he admitted that some important decisions related to cost and schedule risks for Muskrat Falls were not disclosed to him by Nalcor, and that he learned of them through evidence presented at the inquiry.
Kennedy said he was surprised, disappointed and "felt a certain degree of anger" at being left in the dark on such matters.
Specifically, the decision by Nalcor to exclude any strategic risk allowance in its cost estimates, despite a recommendation from a risk consultant to budget $500 million for potential overruns, was not revealed to Kennedy.
And Kennedy said he was not aware Nalcor was taking an aggressive and risky "P50" approach to cost estimates, against the advice of expert advisors.
In industry terms, a P50 means there's a 50 per cent chance of cost overruns, while risk consultants hired by Nalcor were recommending at least a P75, which would have reduced the chance of cost overruns to 25 per cent.
Such a move would have added hundreds of millions to the cost in order to increase the estimate accuracy.
Kennedy was also unaware of a report that determined the schedule to deliver first-power from Muskrat in mid-2017 was practically impossible to achieve.
Turning the tables
Simmons was trying to turn the tables on Kennedy by producing publicly available documents from 2011 that referenced decisions by Nalcor on strategic risk and the probability rating for cost estimates.
Simmons suggested either Kennedy didn't take the time to read it, or that officials in his department, namely Charles Bown, didn't tell him.
"So either you didn't read it when this was filed or it didn't catch your attention enough for you to be interested in it," Simmons stated.
So either you didn't read it when this was filed or it didn't catch your attention enough for you to be interested in it.- Dan Simmons
Kennedy bristled at that, and fired back that it was Nalcor's responsibility to inform him of any decisions that might impact project costs.
"I would have expected Nalcor, sir, to bring these matters to our attention," he said.
Simmons repeatedly pressed Kennedy, and questioned whether Bown should have passed along the information.
"Would you expect officials in your department, including Mr. Bown, to have been aware of the approach that's described here by Nalcor to strategic risk because this is a public document?"
Kennedy replied: "I would have expected Nalcor, sir, to have brought it to cabinet's attention."
Bown is scheduled to begin three days of testimony on Wednesday, and he's sure to face questions on the issue.
But we may already know the answer on how much information he had.
Nalcor vice-president Gilbert Bennett and Bown were meeting regularly prior to project sanction, and Bennett testified he did not inform Bown of the issue of strategic risk and cost estimate probabilities, saying he felt such disclosure should come from former Nalcor CEO Ed Martin.
Kennedy, meanwhile, stood behind his former deputy throughout his testimony.
"I came to trust, respect Mr. Bown: his integrity, honesty and intelligence," he said.
Kennedy takes shot at Nalcor
But the former minister wasn't quite so warm toward Nalcor.
At one point, when asked whether he read a document about the possible impacts of cost overruns, Kennedy took this shot at Nalcor: "If we made a mistake here, sir, (it was) we trusted Nalcor."
- No lowballing on Muskrat Falls estimates, says former CEO Ed Martin, despite testimony from his deputy
Kennedy is just the latest senior politician and bureaucrat to acknowledge they were not entirely in the loop as Muskrat barrelled toward government approval in late 2012 at an estimated capital cost of $6.2 billion.
If we made mistake here, sir, (it was) we trusted Nalcor.- Jerome Kennedy
Costs have since ballooned to $12.7 billion, which includes financing costs, and first-power is not expected to be delivered until sometime next year, two years behind schedule.
Did Kennedy have the full picture?
Kennedy was a leading advocate for the project, both in public and in the legislature, and consistently fired back at those who criticized the plan to deliver hydroelectric power from Labrador's Churchill River to Newfoundland.
But now it's not clear whether he had the full picture.
Meanwhile, the lawyer for Ed Martin, Harold Smith, questioned whether it was even necessary to forward information to Kennedy about strategic risk.
Smith suggested strategic risk was "not current or valid" because Nalcor had implemented measures to mitigate the risk.
Martin has also told reporters that an allowance was not necessary because the provincial government had committed to cover any cost overruns.
"You would only want to be aware of it if it was real, correct?" Smith asked Kennedy.
Martin will testify Dec.10-14, followed by Kathy Dunderdale from Dec. 17-20. Dunderdale was premier at the time Muskrat Falls was approved.