Muskrat Falls oversight committee announced

No update on cost overruns until all contracts awarded, Dalley says

James McLeod
Published on March 25, 2014
Natural Resources Minister Derrick Dalley speaks to reporters Monday afternoon outside the House of Assembly.
— Photo by James McLeod/The Telegram

Natural Resources Minister Derrick Dalley announced new measures Monday for public information and oversight when it comes to the Muskrat Falls project, but he also said the government won’t give any updated cost estimates for the project until all contracts are awarded.

In the House of Assembly, Dalley said a committee of government bureaucrats would look at reports from Nalcor, its independent auditor, the independent engineer assigned to study the project and other sources of information.

“To strengthen and formalize the existing oversight for the construction phase of the Muskrat Falls project, a departmental committee of Finance, Natural Resources and Justice, chaired by the clerk of the executive council, will focus on project costs, scheduling and overall project performance,” he said.

“Also to be initiated and made public by Nalcor this year will be a report specific to the Muskrat Falls project prepared by Nalcor’s external auditors as part of their annual audit. Nalcor will also issue quarterly consolidated financial statements starting later this year.”

The first quarterly report from the oversight committee is scheduled to be released in July.

But Dalley said the reports won’t include any updated information on potential cost overruns as long as there are still contracts left to be awarded, because until then, providing any sort of update on the total projected cost of the project might be financially harmful to Nalcor.

“Right now we review those kinds of things, and once it’s no longer commercially sensitive, we’ll certainly be putting those numbers out,” Dalley said. “Any project this size, particularly when Nalcor is still fully engaged in the bidding process with a number of contractors, by putting any numbers out there at this point (we) may discourage someone from bidding, or it may in fact inflate their bids — recognizing that if there’s cost overruns and there’s more funding, or if we’re under budget, there may be more money available.”

The current cost estimate of $7.7 billion for the overall Muskrat Falls and Maritime Link project dates back to 2012, and massive amounts of work have been done since then.

During question period in the House, Liberal Leader Dwight Ball asked why the government is putting this oversight structure in place only now, since the project was sanctioned more than a year ago, most of the major contracts have been awarded and Nalcor is currently spending well over $1 million every day with construction underway.

“With over $5 billion already committed to the Muskrat Falls project, government has finally announced an oversight committee,” Ball said. “Proper management includes a provision of oversight from the beginning, from the start, even on small projects, let alone a multibillion-dollar initiative like Muskrat Falls.”


Oversight begun

Premier Tom Marshall said all of the study leading up to the project being sanctioned counts as oversight, too, and it’s just that now with the project into a new phase, the government decided to include a new type of oversight.

“Oversight started a long time ago. It started before sanction. We had people like Navigant, independent people look at this, Navigant, MHI, the different reports in the DG2 numbers and the DG3 numbers. We also had Dr. Locke do a report. We had Ziff Energy do a report. We looked at the constitutional issues. We looked at the Upper Churchill,” Marshall said. “There was lots of oversight before the sanction decision was made. Then, of course, we were looking at financing. With financing, the federal government was involved and their lenders were involved. Nalcor’s lenders were involved, the banks were involved. They have hired an independent engineer to do oversight. They had their internal and external counsel. There was lots of oversight going on.”

New Democrat Leader Lorraine Michael said she doesn’t believe that a committee of government bureaucrats reporting to cabinet is sufficiently independent to provide meaningful oversight over Nalcor.

“I ask the Premier: why will this government not allow independent oversight of the biggest investment this province has ever made? What is he afraid of?” she asked.

Marshall said again that there’s all kinds of oversight, and then he even paid Michael a backhanded compliment.

“Mr. Speaker, we come into this House when the House is in session and we are available to questions from the Opposition,” he said. “That is probably the greatest independent oversight you can have.”

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