Former premier Danny Williams recently asked reporters why the Muskrat Falls project is being held to a different standard than Hebron. It seems to me there are at least two rather obvious responses to this question:
1) The increased cost estimates for Hebron were largely calculated before sanction, so the parties involved knew what they were getting into before they made the decision to proceed. This has not been the case with Muskrat Falls.
No one is partnering with the people of Newfoundland and Labrador in the Muskrat Falls project.
2) The partners involved in Hebron constitute some of the biggest oil players on the planet. Exxon Mobil, alone, in for 36 per cent, has a market capitalization of close to $500 billion. In addition, there’s Chevron, Suncor Energy, Statoil Canada and, finally, our own Nalcor Energy, the smallest stakeholder, in for 4.9 per cent. Clearly, the major partners find strength, not only in their own impressive net worth, but in the sharing of collective risk that their partnership allows.
No one is partnering with the people of Newfoundland and Labrador in the Muskrat Falls project. The ratepayers assume all the risk and bear all the costs, including cost overruns from mismanagement, market uncertainty, miscalculation, delays and unforeseen setbacks. Private companies and their shareholders will not bear these costs. They are recovered from citizens through prohibitive taxation, reduced and eliminated public services, borrowing and increased debt, and unaffordable rate increases.
In any case, the comparison posed by the former premier is a false one. Private companies are at liberty to gamble all they want. The public purse, on the other hand, is hardly the place for Mr. Williams to have indulged his self-touted “extremely high tolerance for risk.”