Full audio and background on the Muskrat Falls independent engineer
On Monday evening, I had two interviews with Natural Resources Minister Derrick Dalley. I’ve written a story for today’s paper about what Dalley said, (a really, really long story, actually) but I still wasn’t able to get it all into print because of the constraints of the print medium.
So I’m posting the full raw audio of both interviews online for anybody to listen to. I’ll provide some background and some more information below, including the full, unedited statements I’ve received from both Nalcor and the federal government.
But right off the bat, here’s the audio of the two interviews I did with Dalley Monday night.
I did the first interview around 6:30 p.m. Monday, Then, following that interview, there was a flurry of communication between Dalley’s communications staff and me. They wanted provide “clarification” one a couple of the things Dalley said. The clarification raised more questions than answers for me, and so just after 8 p.m. Dalley called me back.
I apologize that the start of this audio file is a bit rough. Frankly, when the phone rang at that hour of the night, I wasn’t expecting it to be Dalley, so I spent a few seconds fumbling to get my recorder plugged in and turned on. So for a few seconds at the beginning it only picks up my voice and not his – apologies for that.
OK, so that’s the full, unedited raw audio. Here’s the background.
But here’s the quick version to bring you up to speed.
Back in 2012, the Government of Canada provided an agreement in principle to provide a loan guarantee for the Muskrat Falls project, assuming that certain conditions were met. One of those conditions was that Nalcor foot the bill for an independent engineer to go over their numbers and certify that everything was in order. MWH Canada was appointed to do the job, and they went to work.
In November, they filed some sort of report, which was satisfactory for the Government of Canada to formally authorize a $5 billion loan guarantee. (According to Dalley, this is only an interim draft report.)
In early February, I filed an access to information request for “Any reports, documents or other communications sent to the Department of Natural Resources from the Muskrat Falls independent engineer as described in the Muskrat Falls federal loan guaranteed agreement.” If the Department of Natural Resources had any records of any communications whatsoever with MWH Canada, they had to tell me. But three weeks later, the province told me last Thursday that they didn’t have anything at all. Not one e-mail. Not one note. Nothing.
Then, on Friday, one day after the government told me they didn’t have anything at all, the MWH Canada report arrived in Nalcor’s inbox. Here’s the full unedited statement that Nalcor provided me on Friday, courtesy of spokeswoman Karen O’Neill.
In accordance with the terms and conditions of the November 2012 Federal Loan Guarantee (FLG) Agreement, MWH Canada was engaged as the independent engineer for the Government of Canada (Canada), in its capacity as guarantor, to assist in Canada's due diligence of the Muskrat Falls Project. Following the required technical review, MWH issued an independent engineer report to Canada to facilitate satisfaction of the related condition precedent found in section 3.5 of the FLG Agreement. Canada subsequently issued the FLG which then allowed $5.0 billion of Canada guaranteed, AAA-rated long-term bonds to be issued for the Muskrat Falls Project on December 10, 2013.
We just received the Government of Canada's independent engineer report this afternoon. We have not yet reviewed this report; however, due to the commercially sensitive information contained in reports of this nature it is not normal practice for such reports to be released publically.
Following the issuance of the bonds, MWH will serve in an oversight and monitoring capacity on behalf of Canada through the construction and operating phases of the project.”
The story was supposed to run in Saturday’s paper, but due to space constraints, it was held until Monday’s edition. Over the weekend, Diana Quinton, Director of Communications for the Department of Natural Resources, sent me the following statement on behalf of Dalley in response to several questions I’d posed.
I'm working on a story from an ATIPPA request I just got back. I was a little surprised to learn that the department hasn't had any communications with the Muskrat Falls independent engineer, and hasn't received any reports.
My understanding of the Muskrat Falls loan guarantee document was that the engineer would be providing reports and looking at the ongoing costs of the project, and whether things were on track. To my knowledge, it was the only independent oversight in place when it comes to project costs and ongoing analysis as the dam and transmission lines get built.
As you know from the letter you received from the department’s ATIPP coordinator, the Provincial Government does not receive communications or reports from the Independent Engineer. The Terms and Conditions of the Federal Loan Guarantee, the Independent Engineer represents the Guarantor and the Lenders. The assignment of an Independent Engineer was a condition precedent of the Federal Loan Guarantee and work had progressed to the satisfaction of the Government of Canada.
Nalcor has advised that the Government of Canada's independent engineer report was received late Friday afternoon. The Provincial Government will be reviewing that report, and any future reports, with Nalcor.
If Natural Resources isn't dealing with the independent engineer, I'm wondering if there's anybody in the department who's tasked with providing oversight and analysis on what Nalcor is doing while the project is under construction. If not, does Nalcor just have free reign?
I'd like to speak to Min. Dalley about this stuff; we're planning on running a story in Saturday's paper. (I realize he's probably busy today and tomorrow, but since the ATIPP response will be posted online within 72 hours, I need to turn this story around fast.)
As shareholder, the Provincial Government has close relationship with Nalcor and has processes in place to ensure the corporation remains accountable to the people of the province.
At each phase of the Muskrat Falls Project, from sanction, to financing, construction and finally operation, the Provincial Government has had direct oversight of Nalcor. The Departments of Finance and Natural Resources work in close collaboration with Nalcor Energy and have regular meetings and exchanges of information; and cabinet is updated regularly by the CEO of Nalcor on its business operations. The Provincial Government is provided with all the information it requests, including project expenditures and equity investments.
There has been more information made public about this project that any project in the province’s history, providing the opportunity for oversight not only by the government, but by the people of the province. This continues to be a dynamic process that will evolve throughout the life of the project.
In a broader context, the Minister of Natural Resource’s roles and responsibilities are very clear under legislation. The Provincial Government undertakes a strategic planning process every three years which provides the overall direction for all entities, including Nalcor. Annually, entities provide reports on the progress of their strategic plans and also provide financial information. These annual reports are reviewed by the Minister, presented to the House of Assembly, and made public. In addition, the Minister has the right to seek additional information on the activities of the entities if required.
In addition, the Provincial Government can audit Nalcor and its processes; and the Auditor General has open access to Nalcor’s operations at any time.
Nalcor Energy provides monthly benefit reports on the Muskrat Falls Project which includes details on construction and procurement activities, construction costs, safety and environmental activities and details on stakeholder and community consultation and engagement initiatives during each reporting period. These reports are publically available at https://muskratfalls.nalcorenergy.com/newsroom/reports/
After the story ran Monday, the federal government got back to me. The following statement was sent from Jacinthe Perras, a spokeswoman for Natural Resources Canada.
The Independent Engineer was appointed as per the Agreement Providing Key Terms and Conditions for the Federal Loan Guarantee for the Debt Financing of the Lower Churchill River Projects.
The role of the Independent Engineer is to assist Canada in undertaking technical due diligence on the project.
Independent Engineers are commonly engaged by lenders and guarantors to undertake due diligence; their reports are not commonly released to the public, given the commercially sensitive nature of the contents.
In November, the Independent Engineer provided to the Government of Canada a report on the Muskrat Falls Generating Station, the Labrador Transmission Assets and the Labrador-Island Link (together, the Nalcor Projects).
As well, in February the Independent Engineer provided a report on the Maritime Link.
Nalcor has received the final version of the report for the Nalcor Projects. Emera has received the final version of the report for the Maritime Link.
Due to the commercially sensitive nature of these reports, they have not been shared outside the Government of Canada and the proponents.
It’s worth noting that the federal government doesn’t identify the November report as “interim” or “draft.” It’s also worth noting that they have not made anybody available to do an interview with me on this. To his credit, Dalley has been willing to speak to me, and I appreciate it. Nalcor, to its credit, is also exceptionally willing to speak to journalists, and I have never had a problem getting somebody to speak to me with them.
All of this brings us back full circle to the two interviews Dalley did with me on Monday evening. (Which, once again, you can listen to here.)
I’m going to keep following this story. If anybody has any questions about any aspect of this, please feel free to leave a comment or e-mail me at email@example.com
Thanks for reading.