Sanction needed for Muskrat oversight

Ashley Fitzpatrick
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Work at the Muskrat Falls site is continuing despite the project not yet being officially sanctioned by the provincial government.

Sanctioning may appear to be nothing more than a political statement, but the reality is the decision brings into effect specific requirements for Nalcor Energy. For example, there is a requirement to report on progress in living up to promises in the Impact Benefits Agreement with Lab-rador Innu and the Newfoundland and Labrador Benefits Strategy.

Procurement for the project is part of the responsibilities of SNC-Lavalin, under its contract with Nalcor.

Several factors taken into account when considering bids

During a mid-October tour of the Lower Churchill project offices on Torbay Road in St. John’s — where the majority of the SNC-Lavalin team has been based — Nalcor vice-president and Lower Churchill lead Gilbert Bennett said SNC-Lavalin personnel could make recommendations on contracts, but the ultimate decisions on what company is awarded a specific contract lies with Nalcor.

Bennett referred to it as the “owner’s oversight” role.

When provincial Natural Resources Minister Jerome Kennedy took questions from Telegram reporters and editors on Nov. 5, he said Nalcor has been left to monitor itself when it comes to awarding contract and benefits.

“Nalcor has primary oversight of the project at this present time, in terms of the construction, the engineering. The benefits agreement sets out clearly the hiring processes and preferences,” Kennedy said, referring to the project’s benefits strategy.

Yet the benefits strategy does not apply if, officially, there is no project.

As long as the project continues without sanction, the oversight mechanisms do not kick in.

Nalcor’s position

In response to The Telegram’s questions about project contracts, an emailed statement from a Nalcor spokeswoman said, “No reports as outlined in the benefits strategy have been completed or forwarded to government.”

Again, requirements on reporting do not come into play until Muskrat Falls gets the green light.

Even so, Nalcor has been insisting its contractors provide information on employment by the 25th of each month. This information allowed the Crown corporation to, for example, swiftly respond to questions about the number of Labradorians employed on the project to date, when the issue was raised.

From June to the end of August, 214 people were working on the project. Of those, 64 were from Labrador and 130 from the island. Of the 64 Labradorians, 37 were members of an aboriginal group; nine were Labrador Innu.

“We are completing the tabulation of (employment) information to the end of September 2012 now. I hope to have this information completed by early next week,” Nalcor spokeswoman Karen O’Neill has said.

The Telegram found no evidence of wrongdoing by Nalcor when it comes to contracts awarded to date, after reviewing whatever information on contracts is publicly available. Dollar figures associated with contract bids have not been made public.

The Telegram did have questions that could have been answered by an arm’s-length reviewer, but no such reviewer exists.

Considering contracts

Awarding contracts can be tricky business.

Consider the bulk excavation work for Muskrat Falls. Should the contract go to H.J. O’Connell — which recently worked with SNC-Lavalin on the Wuskwatim hydro megaproject of Manitoba Hydro and the Nisichawayasihk Cree Nation? That project has been attacked for going overbudget, but at least SNC-Lavalin would have a strong sense of how the company — which was partnered with EBC Inc. and Neilson Inc. — might react if problems arise.

Also consider that H.J. O’Connell has offices in Wabush and St. John’s, giving it strong ties to the local construction supply and service community.

On the other hand, Pennecon Heavy Civil has strong ties locally and has completed major project work on recent builds like the nickel processing facility at Long Harbour.

Three other companies from outside the province are in the running for the same contract.

The Telegram asked a Nalcor spokeswoman if any preference in contracting is being given to companies Nalcor or SNC-Lavalin has worked with in the past. The answer is no.

As part of the contracting process, companies bidding on work are asked to complete a questionnaire to assist in award decisions. In evaluating bids, factors taken into account include the bid price, a company’s health and safety policies, experience in the required work, credit worthiness, technical suitability and the company’s customer service record.

Also considered is if the bid would service project requirements under the Innu benefits agreement or the provincial benefits strategy.

Awards to date

Work on Muskrat Falls to date has been referred to as “early site work,” and includes a new road and power line. The cost is part of the total $7.4-billion price tag.

Three contracts have been awarded for the site work so far.

NUKUM Forestry was hired to clear trees from where the access road and worker camp sites will be.

Liannu — an Innu partnership involving Pennecon Heavy Civil and M&M Engineering — was contracted to build an access road.

G.J. Cahill was hired for the installation of electrical infrastructure and the supply of a prefabricated control room building.

As of Oct. 31, 12 other contracts, for the supply of various construction materials were also awarded.

Nalcor announced on Nov. 1 that site work would be continuing, regardless of the fact the project has not been sanctioned.

One other contract to further construction work is to be awarded, according to a Nalcor rep.

The Telegram contacted all the local contractors who have landed one of the main project contracts to date. All either opted not to comment or did not respond to messages.

Then there are the subcontractors, but information on supply and service subcontracts is not readily available.

The Telegram recently spoke to a subcontractor in Happy Valley-Goose Bay who was involved in site work in the first half of 2012.

“The work is going to the big contractors. It’s not going to the small contractors,” he said.

While acknowledging he had not contacted larger contractors since his initial stint of work, he said he still felt there was little opportunity for smaller, local companies to take part in the megaproject.

“But you know, it’s the same old story. If you go bitching about it you won’t get nothing.”

When asked whether or not local companies were seeing benefits from the project in contract awards, Kennedy said people should not confuse the requirement for local hires first whenever possible with the idea that local companies will automatically receive any contracts when competing against outsiders.

Local companies must still be competitive, he said.

Organizations: SNC-Lavalin, Nalcor Energy, Newfoundland and Labrador Benefits Strategy.Procurement Manitoba Hydro EBC Inc. Neilson

Geographic location: Torbay Road, Labrador, Wuskwatim Wabush Goose Bay

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Recent comments

  • Tim Jamison
    November 09, 2012 - 22:46

    The over-coverage of this story is growing boring and the conspiracy theories of the antis are big, old YAWNS

  • Cyril Rogers
    November 09, 2012 - 21:58

    INFORMATION-BASED: You are ignoring a key aspect of this project when you suggest it can help us get around Quebec. That is Muskrat Falls but its power is so expensive that nobody on the mainland wants it anyway. Quebec is selling power to Vermont for about 5 cents per kw so how would it make any sense to sell Muskrat power when it will cost closer to 30 cents to get it to market. Also, the line is only able to handle 500 MW, less than one-tenth what is produced at Churchill Falls. Can't see how this line and this project will benefit us. You can choose to ignore the realities if you wish but they are there for any thinking person to see. I would love to have this project work, if it would benefit us as a province, but that cannot ever be the case and all it will do is place our finances at great risk.

  • Brad Cabana
    November 09, 2012 - 21:05

    Parts of this article are false. For starters, the reason Nalcor is not implementing the Impacts and Benefits Agreement (IBA) is because it is an agreement in principle only, and the New Dawn Agreement states the benefits won't start until all three sub agreements of the New Dawn Agreement are finalized. That also requires another referendum on the final New Dawn Agreement. More to come on this Tuesday in St. John's

  • DON II
    November 09, 2012 - 16:05

    Why is work on the Muskrat Falls project proceeding prior to the project being officially approved by the Government? If anyone else started construction of a project from building a fence to building a house without the required final Government approvals the Government would step in with a Stop Work Order. The Government would prosecute any offending developer if they continued the construction without final approvals from Government agencies. It appears that certain parties in Newfoundland and Labrador can build their projects without having to wait for the required final approvals and permits. It appears that disregard for the rule of law shows that incompetence, unethical behavior and corruption has taken solid root inside the Government of Newfoundland! It appears that as far as the Government of Newfoundland is concerned, the Muskrat Falls project is a done deal and there is no need to conform to the niceties of following the law. It appears that the Government sees no reason not begin construction before the project has received final approvals.This is the same Government that allowed the Town of Cupids to illegally occupy Crown land and to allow the operation of an unapproved Commercial Marina for over 2 years before an investigation by the Citizens Representative Office forced the Government to evict the Town of Cupids and shut down the illegal Commercial Marina. It appears that the rule of law does not apply to the Government of Newfoundland and some of their well connected pals!

  • Information-Based
    November 09, 2012 - 14:01

    Wow, what a shrill chorus of nay-sayers and short-term thinkers. This project is a long-term win for this province, and now is the juncture where it makes the best sense to proceed with it. Oil is a FINITE resource, and WILL run out, and all the current shriekers will be wishing they had power half as cheap as the supposedly high projected power prices resulting from the lower Churchill when that eventuality eventuates. Right now, NL has an artificially high bottom line from one time fossil fuel royalty revenue, and generationally-low interest rates. To take advantage of these two factors to develop a long term, major source of renewable energy for the province and the region, while at the same time lessening our dependency on Quebec power corridors and developing our own network of regional power customers, is an ultimately wise and timely decision.

    • Shawn
      November 10, 2012 - 16:27

      The exact same words were preached about Upper Churchill Falls way back when. The fact of the matter is that none of us have enough verifiable facts about this project to make an educated decision. The only facts we have are those provided by a Government that has already proven itself completely non transparent. These are the same players that thought it a wonderful idea to expropriate the GFS mill. The same players that promised a new hospital to the Corner Brook area to gain votes in the last election, all the while knowing it would mysteriously be put on hold once elected. These are people that base the provinces budget on "predicted oil pricing" only to come up short and drive us into more debt. These people have not proven themselves trustworthy in the past so why should we accept their numbers and projections as facts.

    • david
      November 11, 2012 - 11:59

      "Long-term" is a very handy copout description of this means several things: firstly, it dismisses the need for the proponents to use any sort of facts, data, or robust economic rationale to justify plowing's just a "long term" thing, and everything works out in the 'long term'....that's the economic history of Newofundland right there in a nutshell, right? Yay! Secondly, it reveals that the dufuses (dufi?) leading this fiasco will be long gone when the chickens come home to roost...all off to their Florida retirements, enjoying their taxpayer-guaranteed pensions ---- which, BTW, they secured for themselves partly by selling us on this dam thing. Thirdly, it provides false hope, a rainbow to chase, for the people of Newfoundland who otherwise would (very sensibly)be pretty dammed worried that this place has zero economic future after oil. And keeping people calm via deception is just as rewarding in politics as providing great government...and MUCH easier to do.

  • Maggy Carter
    November 09, 2012 - 12:05

    It was an amusing speech - if unintentionally so - that Kennedy delivered yesterday to Rotarians. In terms of the Muskrat Falls file, Kennedy will be remembered for his loud, blustering, in-your-face, at times almost spitting, stammering put downs of its critics. Kennedy had taken the Muskrat debate up a notch in volume and down a notch in substance after taking over from his more circumspect predecessor, Shawn Skinner. Mind you, he had the full endorsement of his leader, Dunderdale, who matched him blow for blow when it came to attacking the integrity of lawyers, economists, engineers and even former ministers who dared question the wisdom of the project. But now as the die is about to be cast, when sanction of Muskrat by the Dunderdale steamroller is mere days away, Kennedy professes a change of heart. Not a change of heart with regard to the substance or merits of Muskrat, but to the manner in which he so quickly, enthusiastically and viciously assailed its critics. His excuse for being a jerk, says Kennedy, is that he was a trial lawyer in a former life and was unable, for the life of him, to exit from the attack mode programmed into his hard drive. Don't get me wrong - his acknowledgement that he was a jerk is a refreshing admission coming from a politician. The question is how genuine or altruistic is it? It might carry more weight if it didn't come at the eleventh hour, after he had pummelled many of his critics into silence, or if he was announcing that government would do the right thing after all. The right thing, of course, is to send Muskrat back to the PUB - an agency that also suffered abuse at Kennedy's hands, and to take his foot off the throat of provincial legislators by opening Muskrat up to full, unrestricted debate in the House of Assembly. It is perhaps more likely that Kennedy has come to realize the damage he has done to his own credibility as a politician, as a lawyer, and perhaps even as an aspiring successor to the beleaguered Dunderdale. But Kennedy can take comfort in the knowledge that, with a few years still left in his government's mandate, there is ample time for his unseemly behaviour to evaporate from the memory of the Newfoundland electorate.

  • Cold Future
    November 09, 2012 - 12:00

    The federal loan guarantee would have to amount to $4 billion today to make the project ecomonically viable, i.e. competitive with going rates for the price of the power (selling price on the mainland).

  • Cyril Rogers
    November 09, 2012 - 11:28

    BLOGDISS, a Federal Loan Guarantee may make the project viable but that will not make it any more reasonable or sensible. The costs will still be astronomical and all out of proportion to the original objective. For once, I truly hope PM Harper breaks a promise to this province!

  • Art John
    November 09, 2012 - 11:25

    If I applied to the town of CBS for a permit to build, and started the work before I received approval, and the permit, the town would be quick to issue a stop work order until the evaluation process was completed. Why doesn't this process apply to NALCOR? At least I am not affecting the environmet as this work surely is!!!

  • Cyril Rogers
    November 09, 2012 - 11:24

    The government and NALCOR are operating on a slippery edge with the way they have gone about this process. The government has used its legislative capacity, and its majority, to ensure that NALCOR's activities and its operations are kept out of the hands of the public. Will this become as big a scandal as the construction industry scandal in Quebec? The government, by siphoning off HUNDREDS OF MILLIONS dollars from oil, and entrusting it to NALCOR, are, in my opinion, depriving the people of this province of their own resources. While DW was applauded when he set this corporation up, a few years ago, it should never have been allowed to operate with no public oversight. We, the public, only get to see what they want us to see, especially now that Bill 29 has been enacted. The whole process would considered "theatre of the absurd" were it not such an assault on democracy.

  • BlogDiss
    November 09, 2012 - 11:10

    A Federal Government loan guarantee will make the project viable, but there is no loan guarantee yet. However, work has been ongoing for a year or so and will continue. The project has not been approved by the provincial government but work has been ongoing for a year or so and will continue until it is approved by government. All of the work that has been done and will be done is included in the 7.4 billion dollar estimate. Oh, and by the way............Nalcor is spending this money without provincial government approval because the provincial government hasnt approved the project yet. What in the hell kind of shop are they running here??????????? One day the sun will NOT shine and have will be no more!

  • Cold Future
    November 09, 2012 - 10:27

    What a tangled ugly mess, wow!