ST. JOHN'S, N.L. - Newfoundland and Labrador's Crown utility has not proven the need for the proposed $6.2-billion Muskrat Falls hydroelectric project, an environmental assessment released Thursday has concluded.
"The panel concluded that Nalcor (Energy) had not demonstrated the justification of the project as a whole in energy and economic terms," said the 355-page report by a joint federal-provincial review panel.
"There are outstanding questions related to both Muskrat Falls and Gull Island regarding their ability to deliver the projected long-term financial benefits to the province, even if other sanctioning requirements were met."
The panel also said the project would likely have several "significant adverse" effects on fish, wetland and terrestrial habitats, as well as the Red Wine Mountain caribou herd.
The report comes a week after the federal government announced it would follow through on a promise to provide a loan guarantee for Muskrat Falls.
Conservative Premier Kathy Dunderdale said she doesn't see how the report came to its conclusions.
"I haven't been able to find in the report where they demonstrate in any way where the shortfalls are in the information that Nalcor has provided," Dunderdale said.
Nalcor Energy said it will respond to the report's conclusions on Friday.
The provincial Liberals said the report validates what they have been saying for months -- that the government and Nalcor have not proven that Muskrat Falls is a viable project.
"We haven't been against developing Lower Churchill. It's been something the province has wanted for many years now," said Liberal member Marshall Dean.
"But Muskrat Falls, in and of itself, we've always said it's been a bad deal. And this report from the panel today confirms that they feel the same way."
Under the conditions of a term sheet announced last year to develop the project, Nalcor Energy would spend $2.9 billion to build a power generating facility at Muskrat Falls capable of producing 824 megawatts of electricity.
A transmission link from Labrador to Newfoundland would cost $2.1 billion, $600 million of which would be provided by Nova Scotia-based private utility Emera (TSX:EMA). It would include a 30-kilometre subsea connection across the Strait of Belle Isle.
Emera would also fund a 180-kilometre subsea link between Cape Ray, N.L., to Lingan, N.S., at a cost of $1.2 billion.
The review panel is recommending the provincial government conduct separate financial reviews before sanctioning Muskrat Falls to confirm whether it would deliver the long-term financial benefits as forecast by Nalcor.
Dunderdale said those reviews are already underway by the province's Public Utilities Board and a consulting firm hired by Nalcor.
"We're on the same path," she said. "We're not misaligned. We absolutely agree."
The panel provides advice to the provincial and federal governments, which will make the final decision on the project's approval.
If it proceeds, the project would provide Nova Scotia with 170 megawatts of energy annually -- about eight to 10 per cent of that province's total power needs -- for 35 years.
Proponents say they hope to have energy flowing in 2017-18.
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 concerns over market access and financing.
Concerns over the loss of habitat that would result from the development of the project have also stalled its progress in the past. But Nalcor has promised to develop a compensation plan to make up for that.
The desire to build more power plants on the Churchill River in central Labrador can be traced back to 1972, when the Churchill Falls hydroelectric dam was finished with Quebec's help.
