ST. JOHN'S, N.L. — The Muskrat Falls Project was announced to the people of Newfoundland and Labrador at a price tag of $6.2 billion, but by the time financial arrangements were being signed at the end of 2013, that capital cost had jumped to $6.5 billion.
No one told the public. And, according to evidence piling up at the Muskrat Falls Inquiry hearings, no one told the provincial cabinet.
Auditor General Julia Mullaley, who was clerk of the executive council, the province’s top civil servant, says both she and provincial cabinet ministers were not aware of the $6.5-billion number. She said that is based on her own memory, as well as review of cabinet documents, emails and available notes.
Her testimony at the Muskrat Falls Inquiry on Wednesday echoes previous testimony from then-finance minister, Tom Marshall, and then-cabinet members Derrick Dalley and Paul Davis.
Former premier Kathy Dunderdale did testify she believed she was made aware of the $6.5-billion figure. But she did not have related details.
“The only possibility would be Ed (Martin, Nalcor CEO) picking up the phone to call the premier, outside of that (cabinet meeting) process,” Mullaley said, when asked about the former premier’s testimony.
Mullaley said, from experience, Dunderdale would have typically reported important information to Cabinet. And when Mullaley was asked if the former premier may have mis-remembered?
“Yeah. That’s likely the scenario,” she said.
Speaking to an auditor’s statement that both the project’s contingency was spent by April 2013 — long before financial close — and estimates were held by the project management team running well beyond approved spending (including a $7-billion estimate before financial close) Mullaley said she was “shocked” and “angered,” learning about it all in 2019, through Grant Thornton’s report to the public inquiry.
Asked about typical updates from Nalcor Energy, Mullaley said there were cabinet presentations, and the president and CEO would often end by mentioning “cost pressures,” but also mitigation.
Inquiry co-counsel Barry Learmonth asked how Mullaley would characterize the updates now, in hindsight.
“I would characterize them as not honest and not open,” she said.
She testified she believes there were civil servants aware of some of the information she was not aware of, including the $6.5-billion estimate at the time of financial close. She was referred to internal emails between some individuals, and she said it appears the government’s “financial close team,” including the deputy minister of Finance and a representative from the premier’s office, would have known.
Those civil servants were already added to the Inquiry witness schedule and are expected to be called in June.
During the lunch break, arrangements were made for Mullaley to go into Confederation Building and try to locate notebooks from during her time as Clerk. They were reported missing, as were notes from former deputy minister Charles Bown. Mullaley reported back that she had no success in finding the notes.
A 'ridiculous statement'
In the afternoon, Martin spoke to reporters, saying he felt a need to clarify how project costs were communicated.
Nalcor’s former president and CEO was asked about Mullaley's comment, about not getting honest information. "I think that's a ridiculous statement," he said.
He said the approach to the Inquiry’s proceedings means also context he or another person might provide doesn't come until the other individual is called as a witness, sometimes weeks later. In this case, he said he wanted to provide it sooner (he is scheduled to be called again to the witness stand on June 12 and June 13, subject to change).
"In my position, at the time, I had to balance two things: one is how quickly could you actually share that with the government, because that was important, but the degree and level of certainty of those numbers is critical. And what we find within an internal, project team, a forecast final cost is something — it's up, it's down; you're waiting for contracts to come in; you're waiting for bids to be evaluated; you're waiting to see how productivity goes, so it's moving all the time,” he said.
"I had to make calls at certain points to say, OK, now I believe we have enough certainty with respect to where this could end up. It's at that time you go into the government and the Board and you say we need more approval. Because once you approve to spend, the project team is then allowed to go in and spend the money.”
He described it as a difference between forecast costs and approved costs; uncertain costs and firmer estimates.
As for the $6.5-billion at financial close, he said he told former premier Kathy Dunderdale directly, though he couldn't pin down when, or if it was first by phone or in person. He said the information was also given to government staff.
"I can't explain the internal government processes. What I know is this: it was clear that in documentation that has been presented here that many, many senior, senior officials in the government were well aware of it," he said.
(NOTE: This is an updated version, including edits and comments from former Nalcor president and CEO Ed Martin.)
Twitter: @TeleFitz
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