Muskrat Falls project secures federal loan guarantee
Muskrat Falls, on the Churchill River in Labrador, is shown in a Februrary 2011 file photo. (Paul Daly / THE CANADIAN PRESS)
Published Friday, November 30, 2012 2:35PM AST
Last Updated Friday, November 30, 2012 7:07PM AST
HAPPY VALLEY-GOOSE BAY, N.L. -- Long awaited backing from Ottawa has vaulted a hydro megaproject that supporters say will unleash Newfoundland and Labrador's renewable energy potential while opening an Atlantic power gateway.
Prime Minister Stephen Harper signed off on a loan guarantee Friday that's expected to save the province and Nova Scotia more than $1 billion in borrowing costs on the $7.4-billion Muskrat Falls venture in Labrador.
He shrugged off Quebec critics who called it an unfair subsidy and said it's a low-risk investment -- even though the project has not been endorsed by an independent regulator.
"I want to emphasize that this project is going to be a real game changer for this province and this region," Harper told a news conference Friday at the 5 Wing Goose Bay airbase in Happy Valley-Goose Bay.
"It is a genuine historic occasion and it is the beginning of what I think will be a very long era of prosperity and opportunity for the people of this region and the entire province."
The federal support, which Harper promised during last year's election campaign, is included in a term sheet that would guarantee up to $6.3 billion in debt over 35 to 40 years for the financing of the project. The remaining cash to reach total cost of the development has been described as the two provinces' initial down payment.
Harper congratulated Nova Scotia Premier Darrell Dexter and Newfoundland and Labrador Premier Kathy Dunderdale, whose determination on the loan guarantee he called "relentless."
Dunderdale said Muskrat Falls is the key to "a sustainable, prosperous future" that will allow her province to harness more of its energy resources -- circumventing what she describes as transmission blocks thrown up by Quebec -- at the lowest cost to the province's residents and businesses.
"You don't see this kind of collaboration and co-operation in the country very often," she said. "We have two provinces and the federal government doing a very significant piece of business together, important to all of our interests."
Dexter said Muskrat Falls will provide secure, reliable energy in a province where many families struggle to pay heat and light bills.
"It means that we will for the first time not be at the end of the extension cord when it comes to electricity. We will in fact be part of an energy loop. We will be in a competitive energy situation for the very first time in our history."
The project would be built in the riding of federal Intergovernmental Affairs Minister Peter Penashue, who has come under criticism for months for overspending his legal limit in last year's election campaign.
The Opposition NDP have also questioned Penashue's involvement in the awarding of contracts related to Muskrat Falls.
Harper dismissed the attack, saying Ottawa is not involved in the tendering or awarding of contracts for the development.
"What the federal government is doing under this agreement ... is providing a loan guarantee at extremely low risk, and frankly, I think in the long-term, zero cost to the taxpayers of Canada," Harper said.
"(Penashue) included this commitment to the people of Newfoundland and Labrador and he is doing exactly what the people of Newfoundland and Labrador ... elected him to do."
Dunderdale's government has waited for the federal support before officially approving Muskrat Falls, which she said is now expected to happen before Christmas.
The Quebec government has opposed Ottawa's involvement as an unfair fiscal handout.
"We'll make sure that we use all tools available to us to make sure Quebec's point of view is being heard, including judicial means," Quebec Intergovernmental Affairs Minister Alexandre Cloutier told a news conference in Quebec City.
"The federal government is acting against Quebec's interests, using Quebecers' money to deploy a federal grant to Labrador, and that will have a bad impact on Quebec's economy."
Later in the day, Dexter said Quebec's opposition to Muskrat Falls would merely reinforce Atlantic Canada's support of it.
"The only effect that will have in Atlantic Canada is that it will strengthen our resolve to ensure the project is completed," he said.
If it goes ahead, Muskrat Falls would be the largest single public expenditure in Newfoundland and Labrador's history, costing almost as much as its annual budget.
It is expected to begin generating power in 2017, and some of that electricity would flow to Nova Scotia through subsea cables.
Opponents say Dunderdale has not proven the case for Muskrat Falls, accusing her of fast-tracking a project without legislative committee scrutiny or debate that could burden future generations if it soars over budget.
She has countered the criticism by releasing a series of government-commissioned reports in recent weeks. They conclude the project is a viable, clean 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.
If it proceeds, 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 development is a joint venture between Nalcor Energy, Newfoundland and Labrador's Crown utility company, and Nova Scotia private utility Emera (TSX:EMA).
Nalcor Energy would be responsible for the construction of 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. Chris Huskilson, Emera's CEO, said Friday that is expected to cost between $1.3 billion and $1.5 billion, though final figures would be presented to the Nova Scotia Utility and Review Board in the future.
Emera has until July 2014 to opt out of the deal, but Harper said he is confident it will go ahead.
"I don't see anything in Nova Scotia that will change that, so I'm very confident that everybody who's a party will remain a party," he said. "This is a project that is in everybody's interest."
Preliminary work on a road to the site near Happy Valley-Goose Bay has already started.
The project has been on the drawing board in one form or another for decades. In 1980, it passed an environmental assessment but was set aside due to market access and financing issues.