Not having consultant review project risk was an ‘omission,’ former premier tells Muskrat Falls Inquiry
Former premier Kathy Dunderdale said she expected any risks on the Muskrat Falls hydroelectric project to be fully assessed and accounted for before her government issued approvals in 2012.
On Monday, on her first day on the stand at the Muskrat Falls Inquiry, Dunderdale was asked about how Manitoba Hydro International — when asked to review project numbers just before sanctioning — was told not to bother with a review of risk and what was budgeted for various risks.
“It’s certainly an omission in MHI’s report that I wish wasn’t there,” she said. “(But) that doesn’t undermine my confidence in Nalcor’s numbers.”
She said she couldn’t say why the direction was given to MHI to not include it. She said she wasn’t involved in the decision to have them not include it.
But the inquiry had already heard the review of risk was dropped in response to a time crunch. Former deputy minister of natural resources and longtime bureaucrat Charles Bown said his understanding was there wouldn’t be time to do the risk review and meet deadlines for a public debate on the project, allowing for sanctioning by the Progressive Conservative government in 2012 — something Dunderdale wanted and testified she wanted.
Inquiry co-counsel Barry Learmonth asked the former premier what the rush was all about.
"We had a schedule that was trying to be maintained,” she replied, later adding the government also needed some way to respond to the “misinformation” in the ongoing public debate.
Dunderdale suggested she isn’t convinced the project was sanctioned at a “P3” schedule, as per a report in September 2012 from Westney Consulting and repeatedly asserted by inquiry co-counsel. The “P3” probability factor suggests the schedule had just a three per cent chance of meeting or being better than the estimate. A far greater probability was for overrun. The consultant’s report was never requested by Dunderdale or government members.
The former president and CEO of Crown corporation Nalcor Energy, Ed Martin, had the reins of the project at the time of sanctioning and has denied the “P3” rating was a true assessment of the real schedule as it stood at the time the project was put forward for its green light.
On the massive cost overruns to date, Dunderdale said she spoke to Martin in 2012 about a “worst case scenario” on the project and was told it could go to $500 million above the original estimate on capital cost. That would move the cost from an estimated $6.2 billion to $6.7 billion. She said she never imagined the project would go billions of dollars over budget, and she is looking forward to hearing more on the specifics behind the cost increases with Phase 2 of the inquiry.
Apart from Nalcor Energy, Dunderdale said she put trust in the bureaucracy and former natural resources minister Jerome Kennedy, having approved a request from Kennedy to deconstruct the project and challenge assumptions, after he took on the portfolio, which included responsibility for Nalcor.
“So when they come back to me and tell me everything is OK, I’m pretty certain that it’s OK,” she said.
Dunderdale said she still has faith in the Crown corporation’s abilities, regardless of the project’s current $12.7-billion price tag (including financing and interest costs).
She continues on the stand Tuesday.