Muskrat Falls hydroelectric project gets green light
Newfoundland and Labrador Premier Kathy Dunderdale talks with reporters at the annual Council of the Federation meeting in Halifax on Thursday, July 26, 2012. (Andrew Vaughan / THE CANADIAN PRESS)
Published Monday, December 17, 2012 12:08PM AST
Last Updated Tuesday, December 18, 2012 11:03AM AST
ST. JOHN'S, N.L. -- Official approval in Newfoundland and Labrador and Nova Scotia has pushed the Muskrat Falls hydro megaproject from an idea three decades in the planning toward a $7.7-billion venture billed as Canada's new energy warehouse.
Premier Kathy Dunderdale sanctioned the development late Monday with full ceremony and a choir in the lobby of the St. John's legislature as Nova Scotia private utility Emera (TSX:EMA) simultaneously approved it.
She called it a turning point in her province's history.
"Harnessing the vast hydroelectric power of the Lower Churchill is a promise that has been hovering on the horizon for 50 years but has remained just out of reach for successive governments of Newfoundland and Labrador," she told a crowd of supporters.
"The most important benefit of this development is that it allows us as Newfoundlanders and Labradorians to stand tall and proud on the national stage, knowing that as our forebears persevered to etch an existence on the edge of the North Atlantic, so will we with unrelenting focus and steadfast determination overcome all obstacles and transform challenges into success."
Muskrat Falls, a joint venture between Newfoundland and Labrador's Crown corporation Nalcor Energy and Emera, is expected to produce power by 2017.
Nalcor would build the dam and power station in Labrador as well as transmission lines on the island of Newfoundland. That is expected to cost about $6.2 billion.
Emera would build a 180-kilometre subsea link that would transmit the power from Cape Ray in southwestern Newfoundland to Lingan, N.S., in Cape Breton.
At a news conference late Monday in Halifax to announce Emera's decision, company CEO Chris Huskilson said the cost of the subsea link has been revised to $1.52 billion.
"This is a go," Dunderdale told reporters as the St. John's sanction ceremony wrapped up.
Nalcor has already spent $317 million on preliminary engineering and construction work at the Muskrat Falls site near Happy Valley-Goose Bay. With official approval, that work is about to escalate, said Nalcor President and CEO Ed Martin.
"We're ready to go and we'll start moving our heavy equipment tomorrow.
"We're moving ahead with the project."
Critics say Dunderdale has not proven the case for Muskrat Falls, and have accused her of fast-tracking a project without legislative committee scrutiny or debate that could burden future generations if it soars over budget.
She has responded to skeptics by releasing a series of government-commissioned reports in recent weeks. They conclude the project is a viable, cleaner source of renewable energy that would wean the province off fossil fuels.
Dunderdale has refused further review by the province's Public Utilities Board since it declined to endorse Muskrat Falls last spring, citing a lack of updated information.
She says her majority Progressive Conservative government expects to pass enabling legislation for the project before month's end -- even if it means sitting into Christmas week, as threatened by the opposition Liberals and NDP.
Former premier Danny Williams announced Muskrat Falls just before leaving politics two years ago. He took in the ceremony Monday and said he has no concern that his legacy will be tied to the project, for better or worse.
"I take great comfort in Ed Martin and his team," Williams said when asked about the potential for major cost overruns. "Inflation happens. And if it happens, then obviously they have to control it. But from a project management perspective, we couldn't have a better person at the helm. So I think we'll be well served and I feel very good about it."
Muskrat Falls would be capable of generating up to 824 megawatts of electricity, 170 megawatts of which would go to Nova Scotia annually for 35 years. That would serve about 10 per cent of that province's power needs.
The project has been on the drawing board in one form or another for more than 30 years. In 1980, it passed an environmental assessment but was set aside due to market access and financing issues.
Liberal Opposition Leader Dwight Ball said sanction of Muskrat Falls was premature. He cited several loose ends, including a Federal Court challenge over the extent to which it was assessed for environmental impacts. The NunatuKavut Community Council, representing the Inuit-Metis of southern Labrador, has protested the project over claims that its members have been unfairly excluded from benefits as the development encroaches on traditional hunting grounds.
"All environmental approvals are not in place, the aboriginal claims are not settled, the regulatory process in Nova Scotia has not even started, and the premier refuses ... any regulatory oversight for this project in our province," Ball said in the legislature. "And she has signed a loan guarantee, a term sheet really, on cheese cloth."
Muskrat Falls got a boost last month when Prime Minister Stephen Harper signed off on a binding term sheet for a federal loan guarantee that would cut borrowing costs by about $1 billion. Ball says the deal is fraught with conditions and that Emera still has until July 2014 to opt out of the project.
The government says it has looked at alternatives.
"We've examined all options," Natural Resources Minister Jerome Kennedy told the legislature Monday, including refurbishing the province's aging oil-fired power plant. "We've looked at wind and natural gas, Mr. Speaker. And the reality is that Muskrat Falls is $2.3 billion cheaper than the next closest project."
NDP Leader Lorraine Michael called the sanction hoopla a pomp and circumstance sales job that was "way over the top."
"We have a loan guarantee with over 20 conditions that have to be met and put in place, one of which is that Emera has to make its proposal to their Utility and Review Board." That regulatory assessment could take another year, Michael said.
"This was all about trying to get Newfoundlanders and Labradorians on their side. And I actually found it rather disgusting, to tell you the truth."