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Two steps the government must take on Muskrat Falls


I refer to the recent column by Russell Wangersky concerning Muskrat Falls and the recent Standard & Poors review of the province’s credit rating.

In the very pertinent section of the S&P review cited by Wangersky, S&P says that the province has an “incentive” to provide an “extraordinary” level of financial support to Muskrat because of Muskrat’s “high profile and economic importance” and because Newfoundland and Labrador Hydro provides “essential services” — presumably referring to NL Hydro’s existing on-island electrical generation and transmission system.

However, phrases like “high profile and economic importance” are mere political arm-waving and have no place in a dollars and cents analysis of the Muskrat fiasco.

Additionally, the billions being sought by Nalcor for Muskrat do not relate to any “essential” service — rather they are for an unwise and suboptimal choice to meet rather small incremental increases in electrical demand — indeed, for the most expensive and most insecure of options.

So S&P provides poor reasons for finding a way of straightening out a Muskrat-induced mess without touching Muskrat. In other words, by cutting the level of current provincial expenditures that are mostly used to provide what many would ironically consider  “essential services.”

Now, at the very least, such a drastic choice should not be contemplated by the new Liberal administration without taking two steps.

First, and immediately, conduct and make public a full analysis of the costs of shutting down the Muskrat Falls project conducted by a group of specialized workout lawyers and financial and hydro engineering experts independent of Nalcor.

A Muskrat shutdown at this stage would not pose issues unknown to the private sector (led by qualified and experienced teams) which currently face such issues on energy megaprojects all over the world totalling hundreds of billions of dollars — sunk costs do not enter into it.

And these teams are working on the basis that hoping for a rebound in oil prices to the $135-per-barrel level used to justify Muskrat is illusionary and not a proper basis for analysis in this new age of shale-induced $30 to $50 oil.

Second, if the North Spur collapses in a quick clay landslide, it would  cause, as James L. Gordon (one of Canada’s leading hydro experts) has forcefully put it, the Lower Churchill River to shift its course to the north of Spirit Mountain, leaving any Muskrat generation assets  “high and dry” and unable to produce electricity.

The firm of EY is doing a review of Muskrat “project risks” but apparently has been instructed to ignore the North Spur issue — the biggest project risk.

Maybe that is just as well. As for the North Spur, it is best to use the hydro industry standard procedure of appointing a “hydro review board”  (as advocated by James Gordon) comprised of three hydro/geotechnical experts to tackle what is an exceptionally complex quick clay technical issue — an analysis of which could well constitute an unsolvable “red light” for the project.

Sound technical and complex?  Sound like a bold bit of decision-making ?

Well, given the stakes, the two steps advocated above seem the least we can justly expect from the new Liberal government.

Cabot Martin

St. John’s

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