How Stan Marshall upended generation tunnel vision at Muskrat Falls
Nalcor CEO ‘astounded’ that concept of bringing in power from Upper Churchill not considered
Stan Marshall knew he was taking on a challenging role when he agreed to come out of retirement and take over as Nalcor CEO three years ago.
But the former head of Fortis Inc., with decades of executive-level leadership experience under his belt, told a public inquiry Friday he was "shocked" by the state of Nalcor and the Muskrat Falls project after stepping into the role.
He added that 2016-17 was the "hardest year of my life" as he attempted to bring some stability to an organization and a project that was heading toward disaster.
"The whole situation was in crisis. The company was in crisis. Muskrat Falls was in crisis. Everything surrounding it was in crisis," Marshall, in his no-holds-barred style, said in response to questions from inquiry co-counsel Irene Muzychka.
Managing a crisis, with Astaldi as the priority
As expected, Stan Marshall pulled no punches when asked to describe what he encountered at Nalcor after being recruited by Premier Dwight Ball in April 2016 to replace Ed Martin, the longtime CEO who left just days previously under a cloud of controversy.
"A lot of what I learned came as a shock to me," he said.
Marshall said he quickly realized it would cost another $3 billion to finish the project, that Nalcor executives and the project team were too focused on finishing the generating station as opposed to the transmission lines, and that a serious shakeup of the management structure was required to upright the situation.
Marshall said he was forced to move into crisis management mode, and it was obvious the No. 1 priority was dealing the main contractor, Astaldi.
He said the company was running out of money, and a major disaster loomed as early as July 2016.
"If Astaldi could not carry on, everything would fall apart," he said.
Talks with Astaldi led to a $150-million "bridge agreement," but government eventually had to pay the company $800 million more than Astaldi's original billion-dollar contract.
If Astaldi had left the project, experts told Marshall the project would be shut down for up to a year, and the costs would increase even more.
Welcome to our boondoggle
It was a year of incredible challenges and change with Marshall at the helm.
He quickly informed the public that the project cost, including financing charges, had swollen to $11.4 billion, up $4 billion from the original estimate, with more increases likely (a year later, the cost increased to the current estimate of $12.7 billion).
And in a move that sent shockwaves throughout the province, Marshall agreed that Muskrat was a boondoggle and "was not the right choice for the power needs of this province."
But it was too late to cancel the project, so he managed to negotiate an additional loan guarantee from the federal government for $2.9 billion, which was in addition to the original $5-billion guarantee.
He had to calm and encourage a project team that expected to be shown the door, and also faced a serious challenge to the project when protestors shut down construction efforts for 10 days beginning in October 2016, a situation which added tens of millions in cost.
And despite stiff opposition from the project team, Marshall pressed ahead with an overhaul of the management structure, including what's known as bifurcation of the project into transmission and generating teams.
What's more, in what could only be explained as a swipe at his predecessor, Marshall said he was "astounded" that the idea of delivering electricity from the Upper Churchill generating station to Newfoundland prior to the completion of Muskrat had not been considered prior to his arrival.
Transmission a priority
With the Muskrat station delayed by two years, Marshall said he felt there was a reduced urgency to finish the transmission lines, but he recognized there was an opportunity to use the power lines to reduce costly oil-fired generation at Holyrood.
With a new line being built from the iconic Upper Churchill to Muskrat, and the 1,100 kilometre line under construction from Muskrat to Newfoundland's Avalon Peninsula, Marshall decided that finishing the power lines must be a priority.
His engineers told him his plan could work, with the addition of a $10-million piece of equipment at Muskrat, so he authorized it.
And since 2018, cheap Labrador power has been flowing to Newfoundland, reducing the need for Holyrood.
"If we hadn't done that we'd be in a hell of a mess," he said.
Marshall compares Muskrat to Hibernia
Marshall agreed with Muzychka's suggestion that the focus on finishing Muskrat may have been a reflection of the fact that most of the project team came from the oil and gas sector.
Marshall said the generating station — a massive concrete structure built on a single site — was comparable to constructing the Hibernia oil platform. But the power lines stretched out over hundreds of kilometres, and he agreed the team lacked the transmission expertise to recognize the opportunity that was before them.
"Nalcor missed it too. Maybe it was Nalcor's responsibility other than the project team," said Marshall.
On the heels of that criticism, Marshall offered praise for the team, most of whom remain with the project.
"The people I have there now, if I were building another hydro project I'd have no problem at all hiring them to build it. They have worked very hard. They've done everything I've asked and more besides. I do not fault the project management team at all," he said.
Friday was just the first of what is expected to be three days of testimony for Marshall. He will be followed by Premier Dwight Ball in early July.