Premier Dunderdale remains 100% confident in the Muskrat Falls hydro-electric project in Labrador. That was her key message in this interview posted by CBC this week.
The project was originally justified on the grounds that export sales to New England would cover a significant portion of the project’s costs. Since the project’s launch, the shale gas revolution has developed across North American, driving down natural gas and electricity costs, and punishing merchant power generators. Starting at around 2:50 into the interview, Premier Dunderdale responds to concern that prices in the New England electricity market are very low. She replies that since New England governors are asking Canadian provinces to develop more generation that therefore this is proof that there is a market for power in New England. So eager is she to find some support for her embattled project that Premier Dunderdale fails to notice the New England governors are only seeking even cheaper power.
Starting around 6:10 into the interview, Premier Dunderdale attempts to address new evidence that the project element to build an underwater transmission link between the island of Newfoundland and Cape Breton is in trouble. Ms. Dunderdale denies that Emera has exit options. She claims that the NL government has considered “every possible thing that might go wrong”, “we have remedies”, “you don’t make this kind of a commitment on a wing and a prayer”, “every eventuality has been contemplated and there is a remedy in place for it. This is the foolishness you have to deal with.” The interview concludes with Premier Dunderdale remarking that her government is still seeking every opportunity to thwart the 1969 Upper Churchill contract.
My analysis of NL’s Water Management Agreement (WMA), which Nalcor is relying on in its plan to seize a portion of the winter output of Upper Churchill generation, is that the the WMA is an attempt to thwart the 1969 deal. Hydro Quebec litigation appears poised to crush Nalcor’s operational plan for Muskrat Falls.
This clip is my interview with CBC NL TV on Thursday this week. The comments page heaps disapprobation in my general direction.
In the interview, I point that that even some bankers and the New England governors are starting to see the Muskrat Madness train wreck coming. The CBC interviewer, Debbie Cooper, seemed surprised to learn that lots of serious folks have looked at Muskrat Madness and found reason for concern. At this point in the history of the project, with unanswered questions left hanging such as Hydro Quebec’s Upper Churchill water and power rights litigation now under way, the geological stability of the Muskrat Fall north dam in question, the contract with Emera in tatters, the expected green power premium, and the New England export plan out the window, Cooper’s surprise seems surprising. Ms. Cooper went out of her way to claim I had stated that the Nova Scotia utility regulator had turned thumbs down on the deal, but I bit my tongue. Had time allowed, I wanted to point out that the NS regulator has attached such a severe condition to its approval of the deal — a new large, firm, long-term commitment of cheap power to accompany and dilute Emera’s existing commitment to a modest-sized, firm, long-term purchase of very expensive power from Newfoundland — that the “conditional approval” is really no approval at all.
Dunderdale’s denials fail to address any of the substantive issues piling up on the Muskrat Fall project. Newfoundland has sunk well over $1 billion into Muskrat Falls so far, whereas Emera has sunk hardly anything and maybe indemnified by the NS government for even the small sum it has spent. I fear that Muskrat Falls will prove to be the worst power project in the history of Canada.