Questions swirl around $664M for Nalcor

James McLeod
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Newfoundland and Labrador Natural Resources Minister Jerome Kennedy makes a point as he speaks to reporters during a Friday afternoon news conference at the Confederation Building regarding Kruger’s Corner Brook Pulp and Paper mill. — Photo by Joe Gibbons/The Telegram

It was one of the largest line items in this year’s provincial budget — a massive $664-million allocation to Nalcor.

Speaking with The Telegram Friday afternoon, Natural Resources Minister Jerome Kennedy explained the vast majority of that money will sit in an account, unspent, until the government decides whether to sanction the Muskrat Falls project.

And while the budget allocation hasn’t received a lot of attention — a sum which represents roughly nine per cent of the total provincial budget — opposition politicians are saying the way money is allocated underscores a lack of transparency from the province’s energy corporation.

Kennedy acknowledged Nalcor is different than a regular government department, and doesn’t have the same sort of oversight and rules attached to it, but he defended that.

“Some of the corporate structure of Nalcor and some of the powers given to them are to ensure that we get the best deal possible as a province,” he said. “To compete in the oil and gas business, they have to be given certain powers that don’t necessarily exist in other government departments.”

Of the $664 million, $655 million will go towards the Muskrat Falls project. The other $9 million Nalcor will use along with $66 million of its own money to make investments in the oil and gas sector.

By comparison, the entire Department of Justice budget this year is $259 million.

It’s possible none of the $655 million will get spent if the project is delayed, or in the event the government chooses not to sanction the Muskrat Falls project.

Last year, the government set aside $348 million for Nalcor, but because of delays in the environmental assessment process, and because Nalcor made enough money to pay for its own oil and gas investments, they didn’t need to touch the money.

Kennedy said that if the government chooses to sanction the Muskrat Falls project, the $655 million will be part of a total cash influx from the province of around $2 billion.

However, he said because it’s an investment in an infrastructure project that will generate revenue for the province, the money spent won’t count towards the deficit or the province’s net debt.

Liberal Leader Dwight Ball said he’s uncomfortable about the big pot of money just sitting there with the government, ready to start flowing as soon as the government sanctions the project.

More broadly, he said, the purpose of having a provincial energy corporation is to have it generate money for the government. Ball said there should be some sense of when Nalcor will start paying the government, instead of the other way around.

“If they decide to go ahead and sanction this project, the money starts flowing,” he said.

“So at what point do we start getting a cheque from Nalcor to support this debt? We haven’t been able to get that answer.”

New Democrat MHA George Murphy called it “sickening” to see that kind of money spent on Muskrat Falls.

“We don’t know what’s on the go there, it’s plain and simple,” Murphy said. “We haven’t been able to get a good breakdown of the spending, where Nalcor is putting the money.”

But Kennedy said he’s firmly holding the purse-strings when it comes to the money, and it will only be transferred to Nalcor as needed, for specific things after Muskrat Falls is sanctioned.

Kennedy said as the final details of the project are pulled together for the sanctioning decision, people will have a better idea what that money will be spent on.

“We don’t simply take $664 million and provide it to Nalcor,” he said. “What you will see when we get to Decision-Gate 3 numbers, however, will be a much greater breakdown in terms of the money required and where that money will go.”

 This article has been altered to fix a typo.

Twitter: TelegramJames

Organizations: Department of Justice

Geographic location: Muskrat Falls, Decision-Gate

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Recent comments

  • P
    May 24, 2012 - 16:57

    Here is an alternative outlook on energy usage on the Avalon.

  • JAW
    May 20, 2012 - 07:26

    So, Gerald, I guess you are establishing yourself as an opposition hack. There is a platform of leaders at the helm of the Muskrat Falls Development. This may be confusing to some people who are generally content to simply react, and are not compelled to be responsible and proactive. I certainly don't consider myself a government hack, but there is no denying what they have done for this province. My work requires me to travel the globe and now wherever I go there is an elevated sense of this province. This is because of the progress this government has made. I once had to listen to Wise Cracks and Newfie Jokes but now people, worldwide, are interested in our province and I now listen to compliaments, instead. It gives me such a feeling of pride. So, to the government, keep up the good work! To the opposition and their hacks, take note!

    • Gerald
      May 21, 2012 - 14:07

      Leaders? Leading us down the garden path, you mean? Then you are correct. There is "an elevated sense of this province" thanks to oil. It is not because of this government or any other and really if any govt should take credit it would be the Liberals for laying the groundwork for the oil deals and for one of the current govt's biggest sources of revenue, Voisey's Bay!! Time to check your history!

  • I would vote for Dwight Ball as Premier as long as he agrees with me that the Natural Resources belong to the province, the people of the province and not the politicians
    May 19, 2012 - 15:53

    Mr. Dwight Ball you will be sanctioned by me to be Premierr as long as when you take over leadership of the province you take care of our natural resource development in a manner that will benefit the people, the province and not yourself and your friends. Politicians should not be developing our resources for their own benefit. That should be listed as a Conflict of Interest and any politician caught doing such a thing should have to be dealt with by the law.

  • Gerald
    May 19, 2012 - 12:36

    I see the government hacks are on here in full force to discredit the reasonable questions about this massive pot of our money for a project that hasn't even been sanctioned yet. If they only knew, or maybe they do and do not care, how irresponsible and outrageous they are. The fact that this money does not undergo any scrutiny, Nalcor does not undergo any scrutiny, and we simply are not allowed to know - by law - what this money is allocated for exactly is not only ethically wrong, but I question how legal this all is????

  • Maurice E. Adams
    May 19, 2012 - 12:21

    The debt servicing and operating costs alone (not including the additional $1.1 billion interest during construction, cost overruns, escalating price increases, etc.) for Muskrat Fall is $14.5 billion over 50 years. Dr. Bruneau says natural gas costs for our current use level of Holyrood would be about $23 million/year (25% of oil costs). For 50 years, that would be about only $1.2 billion.

  • SteveD
    May 19, 2012 - 11:09

    So how is his big pot of money being invested in the interim and what is being done with the interest? Even at only 1%/year that is still a substantial sum in interest payments to account for.

  • Ashley Parker
    May 19, 2012 - 11:01

    So Dwight, what are you saying? We should wait until the Muskrat Falls Project is sanctioned and then make a mad scrabble to find the money. Lack of advanced budgetary planning or financial commitment wouldn't seem a responsible manner for either government or private industry to prepare for a potential mega project. Is this the Liberal strategy?

  • Richard
    May 19, 2012 - 09:24

    Nalcor sure is expensive.

  • Charles
    May 19, 2012 - 09:22

    Mr Ball and Mr Murphy...That not a very good Argument concerning this matter...What you should have done...Give a plan to the peoples...If the Liberal or the NDP was in power...How they would have when about it...How this amount of money...should have being use for the people...

  • Brett
    May 19, 2012 - 09:09

    Dwight Ball: what a very poor sighted way of thinking about infrastructure projects. One would think that we wouldn't want public utilities making profits for services provided to the province... That would be over charging + essentially a hidden tax. Think man. Think. Wouldn't you rather have the utilities charge only the cost of providing the service (and maintenance costs of the system) - any new or change in direction would require additional capital if/when the government representing the constituents of the province decides that we want to expand the mandate of the utility??? But good try at causing an uproar and populist anger!!! Yeah yeah - Nalcor should pay - it should all be free for us!!! Why can't they just make more money!!!! Ridiculous argument.

  • Brett
    May 19, 2012 - 09:04

    Please correct your article. "Of the $664 million, all but $655 million will go towards the Muskrat Falls project. The other $9 million Nalcor will use along with $66 million of its own money to make investments in the oil and gas sector." Should read "Of the $664 million, $655 million will go to towards the Muskrat Falls project..."

  • jinx
    May 19, 2012 - 08:19

    If jkenndy wins this case, NL is doomed. It just shows how out of touch this government is with the people and the needs of the province. Divorce this project, it didn't work 40 years ago for the extact same reasons. What gets me is that our old premier put together nalcor that can operate under finanical darkness, signing a bogus MOU on his last day to avoid a conflict of interest, help tow the shady emera along with a few million dollar hobbles and now is lobbing our government for cheap power after being hired by the min ing company. Was that what nalcor was created for? This does set will with me. And now kennedy will take a piece off the union for the people who are trying to protect their future. And there's the missing power!

  • Liberal Leader Dwight Ball is concerned with the bit pot of money sitting in Nalcor's Account.
    May 19, 2012 - 07:44

    Liberal Leader Dwight Ball said he’s uncomfortable with the big pot of money sitting in Nalcor's Account. And so should concern be shown by every other Newfoundlander and Labradorian, including all members of the Ruling Party and Opposition parties. We want this pot of money to be watched over with a leery eye. What are they going to do about it?

  • David
    May 19, 2012 - 07:08

    Go ahead and build roads in the wilderness, give Nalcor hundreds of millions of dollars, and tell us that Muskrat Falls is not already a done deal, come hell or high water (pun intended, with hell is the more likely outcome). We're just that stupid.