Muskrat Falls questions answered

Ashley
Ashley Fitzpatrick
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Construction of a dam at Muskrat Falls is one piece of the Muskrat Falls project. The project also includes building a new backbone line for power along much of the province and a power link between the island and Labrador, across the Strait of Belle Isle. - Telegram file photo

With the Board of Commissioners of Public Utilities' (PUB) public sessions on Nalcor Energy's proposed Muskrat Falls hydroelectric megaproject, there has been a great deal of project information gathered and released to the public.

While awaiting the board's final report (expected by March 31), The Telegram presents a collection of questions about the project, paired with answers as they are available to date.

Additional detailed information on the project is available on the websites of Nalcor Energy and the PUB.

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Is this a done deal?

The Muskrat Falls project is not set in stone. It will need to be sanctioned by the provincial government if it is going to go ahead. That decision - "go" or "no" - is expected to come later this year. The decision will be made once the PUB has submitted its review of whether the project is the least-cost option for supplying power to the province, when compared with an "isolated-island" option. The decision will also follow discussion in the House of Assembly.

There will be no special session to debate the project in the legislature. The debate on Muskrat Falls will have to come as part of debate scheduled on the annual provincial budget.

Nalcor expects to have updated assessments of project costs by mid-year (the target is June), to assist the government in its decision.

In addition to this, the provincial and federal Environment ministers will issue a final decision on the environmental side of the project.

We've already spent about $500 million on the Lower Churchill project. How can this be if the project hasn't been approved?

About $119 million was spent by prior administrations from the 1970s to 2003.

Spending has centred on gathering information needed to assess options for meeting the province's power needs. This includes obtaining legal opinions on pre-construction agreements and power sharing with other provinces, as well as gathering documentation required for the environmental assessment processes and for assessing financing options.

Information collected goes beyond the Muskrat Falls project, including the development of Gull Island.

According to Nalcor, spending on construction will start if and when the project is sanctioned.

How much will this cost?

This question is still a subject of public debate.

The project has an initial estimated cost of about $6.2 billion (including the maritime link with Nova Scotia, to be built and paid for by Emera Inc., a Nova Scotia energy company).

However, concerns have been raised by critics about the potential for cost overruns.

Nalcor has prepared for overruns to the level of 15 per cent of the cost, having built the potential for overruns into its cost estimates.

Manitoba Hydro International has said overruns at 50 per cent would bring the Muskrat Falls option to about $200 million less than the "isolated-island" option. It has also been said a 50 per cent cost overun is as likely as being 30 per cent under budget.

Large overruns would mean a financial hit to both the provincial government and ratepayers.

Apart from this, the method of financing has been questioned. It has been asked whether the project is going to need more cash from the province up front than initially estimated.

Both Nalcor Energy and the Dunderdale administration maintain the project can be completed under current conditions and within the current cost estimations. Those estimations are to be updated before a decision is made on sanction.

Will I pay more for power when Muskrat Falls is built?

Yes. However, power costs are anticipated to increase no matter which option is selected for power supply.

Supporters of the project have emphasized the volatility of oil prices and the potential for those prices to increase quickly and dramatically, shooting up the cost of power.

Those opposed to the project have suggested oil prices might not increase as predicted, and there is a greater risk in the potential for cost overruns on Muskrat Falls construction moving beyond the contingencies.

Under the Muskrat Falls plan, Nalcor has estimated someone with a power bill of $400 in 2017 will pay $416 in 2025 and $469 in 2040. Compare this with the same customer paying an estimated $454 in 2025 and $627 in 2040, when compared with the isolated-island option.

Will I pay more for Muskrat Falls power than someone in Nova Scotia?

That question has yet to be answered.

Emera is set to pay 20 per cent of the cost for 20 per cent of the power from Muskrat Falls, and Nalcor is covering 80 per cent of the cost for 80 per ent of the power.

How those costs fall out once blended into two different systems will be different.

Muskrat Falls will provide about 20 per cent of this province's power supply and about 8 per cent of Nova Scotia's power supply.

Rates are calculated differently in each province. Nova Scotian rates today are higher than those in Newfoundland and Labrador.

Yet an agreement with Emera for construction of the link with Nova Scotia has yet to be settled.

When will the Holyrood power plant be shut down?

Should the Muskrat Falls project be approved, Holyrood will be used for some generation until 2021. After 2021, it will no longer generate electricity and emissions.

If the project is turned down, the facility will continue to be used as it is today, until it needs to be replaced, and $600 million will be spent on new environmental controls to address emissions from the plant, with an anticipated in-service date of 2015.

Will this project affect the fish in Lake Melville?

Concern for the regional fish species were raised by NDP Leader Lorraine Michael during the radio debate on Muskrat Falls held Feb. 8. Michael cited the report of the joint federal-provincial environmental review panel, released in August 2011.

The report notes concerns raised by the Government of Nunatsiavut over the possibility of "mercury moving downstream in sufficient quantities to contaminate fish and seals, and eventually require consumption advisories."

The panel stated there was "considerable debate" on the subject and "not everyone agreed with Nalcor that the effects would not be measurable past the mouth of the river into Goose Bay and Lake Melville."

It was recommended Nalcor conduct a comprehensive assessment of potential effects of the Muskrat Falls dam downstream and that the company publish the findings once the assessment was completed, prior to construction.

Nalcor says mercury sampling studies in river systems (including the Churchill) have shown concentrations will be higher downstream for a period of time, but will decrease as the river system transitions to open water. This means Nalcor expects concentrations to stay near baseline levels in Lake Melville.

The company has committed to monitoring fish and seal health in Goose Bay and Lake Melville.

I live in a town operating on electricity from a diesel generator. Will I come off diesel power with the Muskrat Falls project?

No. The transmission line associated with Muskrat Falls has been referred to as a "backbone" for the province and does not link in isolated power systems, such as those along the coast of Labrador and isolated communities on the coast of Newfoundland.

However, study of alternative options for power-isolated areas is underway and Newfoundland and Labrador Hydro is assessing potential ways to provide power to these areas in future.

afitzpatrick@thetelegram.com

 

Organizations: Nalcor Energy, Board of Commissioners of Public Utilities, Emera Inc. Manitoba Hydro International Churchill Newfoundland and Labrador Hydro

Geographic location: Muskrat Falls, Nova Scotia, Lake Melville Newfoundland and Labrador Gull Island Holyrood Goose Bay

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Recent comments

  • Dave
    March 05, 2012 - 09:53

    People voted the bully PC governments in and then complain because they are bullied. You supported them and rallied to get them in so don't whine to everyone who warned you that your Pensions are gone, Electricity goes through the roof etc. That whole baby boomer generation has screwed us from the start so no sense in stopping now.

  • Louie
    March 05, 2012 - 07:06

    When this (lower cost of two very limited options) project is rubber stamped by PUB and authorized by governnent, newfoundlanders can say goodbye isolated grid, hello connected grid, hello the highest electricity rates in Canada and hello the highest per capita debt in Canada once again. It will represent the second largest giveaway to a neighbouring province since the Upper Churchill deal and unfortunately will likely bring about another future set of embarrising court challenges when we feel shortchanged once again. Its our history, its our heritage after all!

  • All indications
    March 05, 2012 - 04:44

    All indications are that it’s a done deal no matter what. They’ve even said it’s going through with or without the loan from Harper. It came out at the PUB hearings that 12 to 13 Million dollars Per Month are currently being spent on it. Cost doesn’t matter now but when they get halfway through the building phase and run out of money; that is when electricity bills for households and industry will skyrocket, family incomes will be drastically reduced and more will be added to provincial/national debt. We don’t need Canada to keep us down. We do a great job of that on our own. Where’s the benefit for NfLders in a couple of hundred temporary construction jobs and debt for the next 50 years? Haven’t we already been there? Can’t we try something else? Like how about becoming a Have people to match our Have government? Hundreds of kilometers of forest cannot be flooded without killing and/or contaminating every living thing within its range. What about the people who live on the coasts of Labrador and Newfoundland? What about the people who work in the fishery? Where would NS, NB, PEI, BC, and the states be without their fisheries? What’s so different about us? We are willing to pay more for our own resource while NS gets it cheap or free. Is Muskrat green energy under America’s laws or does it matter since it isn’t produced in their country? If my power bill is $400 now, what will it be in 2017? Using taxpayers’ money to develop the most expensive energy is like throwing the baby out with the bathwater. Let the market function on economics and the energy sector distribute to consumers at lower cost. I agree with Maurice E. Adams 100%.

  • pete
    March 04, 2012 - 20:53

    Our children will pay more down the road because the cost of electricity will go up. I would much rather them know what there going to pay then wait and see what a price of oil will be when there is less and less oil in the future! its clean it gives us a link to sell of the island get on with it!!

  • John Smith
    March 04, 2012 - 15:45

    Get on with it...for god's sake.

  • Maurice E. Adams
    March 04, 2012 - 14:23

    "Will I pay more for power when Muskrat Falls is built?" +++++ What Nalcor has done is offered up "the worm". The "hook" is for our children and grandchildren. ++++++++ Muskrat Falls costs have effectively been HIDDEN by the way Nalcor has changed the 'pricing' for us IN THE EARLY YEARS. ++++++++ We get low enough pricing in the early years, but our children and grandchildren pay about 20 times more in the future for their Muskrat Falls power than if we paid our true costs in the early years. ++++++ It is like as if you kept your mortgage payments on your house as low as possible in early years (so you can have that bigger house, and low payments), but to do so you have to extend the time out to 50 years instead of 30 years, and you have to get your children and grandchildren to co-sign and pay large payments long after you are dead. +++++ That helps explain why Dunderdale puts so much emphasis on the "loan guarantee". ++++++ How many ratepayers would support Muskrat Falls if they knew that they would be causing their children and grandchildren to pay 20 times more for that power than they should IF we paid our fair share NOW --- that is, if we paid for it like we did a mortgage? ----- And we don't even need the power. +++++ But this is a "take or pay" contract --- even if it turns out that we don't (and out children don't) need the power ---- WE AND OUR CHILDREN STILL PAY. If Nalcor is SO CERTAIN that we need the power ------ WHY DO THEY NEED (MUST HAVE) A "take or pay", iron clad ---- CONTRACT?