Nfld. & Labrador

Muskrat inquiry could add $45M-$162M to final cost of project, says report

The inquiry investigating why Muskrat Falls is so far over budget and behind schedule is being cited as another risk facing the project as construction enters the final phase.

Risks could add anywhere from $170M to $370M to project costs

This aerial photo of the Muskrat Falls dam and power generating station on the Churchill River was taken in November. (Nalcor)

The inquiry investigating why Muskrat Falls is so far over budget and behind schedule is being cited as one of the risks that may drive costs even higher as construction enters the final phase.

And the potential cost of these risks? Anywhere from $170 million to $370 million, according to an assessment carried out by Westney Consulting.

Westney is now a familiar name for those following the inquiry, since it's the same company that advised Nalcor to take a more cautious approach to its cost estimates for Muskrat prior to final approval of the project six years ago.

No money budgeted for risks

In its latest assessment, the company identified four additional factors that might affect costs and schedule for the generation side of the project, and the ongoing commission of inquiry led by Justice Richard LeBlanc is among them.

It estimates the inquiry could add anywhere from $45 million to $162 million to the cost of the Muskrat Falls project because of the demands placed on project team members, and the disclosure of commercially sensitive material that could be used against Nalcor in future litigation by contractors or Indigenous groups.

Stan Marshall is CEO of Nalcor Energy, the Crown corporation overseeing construction of the Muskrat Falls project. (Terry Roberts/CBC)

"Well, I am concerned about it. I've been concerned since the beginning," Nalcor CEO Stan Marshall told CBC News on Tuesday afternoon.

"But we've taken the steps we can to try to mitigate things like working with the inquiry and encouraging the government to give direction in terms of limiting disclosure of commercially sensitive information. But at the end of the day these are things we can't control. We deal with what is put on us."

Marshall repeated his position that the inquiry should have been held after the hydro project is completed.

"We had no choice in the matter. The public wanted an inquiry now. They've got an inquiry now. And now they must bear the risk what that would take beyond what would normally happen if you have an inquiry after the fact," Marshall said.

Justice Richard LeBlanc is the commissioner of the Muskrat Falls public inquiry. (Terry Roberts/CBC)

The other risks include the potential for further protests in Labrador, the ongoing work of the independent expert advisory committee, and any unforeseen directives from government.

The risks and potential costs were included in a quarterly project update prepared by the Muskrat Falls oversight committee in November.

CBC requested a copy of the full report, but Nalcor said its legal and project teams were reviewing the report's contents before releasing it, to ensure it does not contain commercially sensitive information.

There's a lot of commercially sensitive information out there that contractors could use in a legal dispute with us that could cost us dearly. There's a lot of demands made upon our key people to be doing things that have nothing to do with the actual execution of the work to respond to inquiry demands.- Stan Marshall

A separate quantitative risk assessment on the transmission side of the project was also completed, and CBC has also requested details of that report.

Meanwhile, there is no money in the $10.1-billion construction budget for these risks, and Nalcor says it is focused on minimizing the potential impacts.

"There's a lot of commercially sensitive information out there that contractors could use in a legal dispute with us that could cost us dearly. There's a lot of demands made upon our key people to be doing things that have nothing to do with the actual execution of the work to respond to inquiry demands," Marshall explained.

'Loss of focus'

Premier Dwight Ball announced the inquiry in November 2017 because of skyrocketing costs and long delays in construction.

The Lower Churchill Project, as it's formally known, was sanctioned at a construction cost of $6.2 billion ($7.4 billion with financing costs included) in December 2012, with first power scheduled for mid-2017.

But all-in costs have soared to nearly $13 billion, with the project more than 95 per cent complete, and first power not expected until late this year.

There were more than 60 Phase 1 public hearing days between September and December, with a similar number of witnesses testifying before the inquiry.

Phase 2 hearings will begin Feb. 18 and continue until the summer.

Paul Harrington is project director for electricity generation at Muskrat Falls, but served nearly a decade as overall project director. He testified for two and a half days at the Muskrat Falls inquiry in November. (Terry Roberts/CBC)

Several key members of the project team have already testified at the inquiry, including project director Paul Harrington, and are expected to be called again in the future. They are also required for interviews with both inquiry counsel and accounting firm Grant Thornton, which is conducting forensic and investigative audits of the project.

Nalcor says there's a potential for "loss of focus" that could result in higher costs.

What's more, more than four million documents have been entered into evidence at the inquiry, including many that might otherwise be deemed commercially sensitive.

Nalcor says it's possible some contractors could use this information for future litigation against the corporation.

The decision to begin the inquiry before the project is complete has previously raised concerns, including Nalcor CEO Stan Marshall warning a year ago that it would be a distraction for project managers.

"The last thing I need is more people coming in for explanations," Stan Marshall said during a presentation at Memorial University in February. "Now I've got all my key people distracted about what they did two or three years ago."

And former Nalcor CEO Ed Martin also blasted the timing of the inquiry following the conclusion of his testimony in December.

"Here we are in sitting in a public forum, mid-project — or certainly with time left on the project — with contractors, stakeholders, our Indigenous partners and everything else with issues, and we're up here, putting every number and every thought and every deal up there on the screen for the world to see. I think it's crazy," Martin told reporters.

Martin said the inquiry should have come later, after the project was complete.

Read more from CBC Newfoundland and Labrador

About the Author

Terry Roberts is a journalist with CBC's bureau in St. John's.

Comments

To encourage thoughtful and respectful conversations, first and last names will appear with each submission to CBC/Radio-Canada's online communities (except in children and youth-oriented communities). Pseudonyms will no longer be permitted.

By submitting a comment, you accept that CBC has the right to reproduce and publish that comment in whole or in part, in any manner CBC chooses. Please note that CBC does not endorse the opinions expressed in comments. Comments on this story are moderated according to our Submission Guidelines. Comments are welcome while open. We reserve the right to close comments at any time.