Inquiry testimony raises questions whether Muskrat review was truly independent

A 2012 consultant's report repeatedly used as justification to sanction Muskrat Falls may not have been as independent as advertised.

It was revealed Monday that senior officials in the government of then-Premier Kathy Dunderdale and at government-owned Nalcor took a very active role in the preparation of the final report, which recommended sanctioning of the project as the least-cost option for the province's future electricity needs.

'A complete flip-flop'

The involvement included removing some information, especially details related to project risks, and changing the tone and language in some elements of the report by Manitoba Hydro International (MHI).

At one point, commission co-counsel Barry Learmonth described the change in tone from the draft stage to the final report as a "complete flip-flop."

When asked why the changes were made, and by whom, MHI's Paul Wilson said several times, "I don't have an answer for you on that."

But Wilson acknowledged that changes were made at the request of Charles Bown, then-associate deputy minister with the Department of Natural Resources.

Learmonth went so far as to suggest the language was "watered down" and the "tone is much milder" in the final report.

"I got the revised drafts back from Charles Bown with the risk removed," Wilson said of earlier versions that contained cautionary language for Nalcor about project risks.

Critics respond

Wilson also admitted that senior officials at Nalcor, including Brian Crawley, were seeing draft reports at various stages of the process.

The disclosure left critics of the project questioning whether the public was given a full and accurate story when government hailed the report as further proof that Muskrat was the best option.

"There's certainly issues relating to the independence of Manitoba Hydro International and the report that ultimately was delivered to government and was trumpeted by the government to sanction the project," consumer advocate Dennis Browne said following Monday's testimony.

We're seeing a report … where government or Nalcor recommended and sought specific conclusions to be changed. Toned down. Taken out entirely.- Des Sullivan

"We're seeing a report that repeatedly went through drafts and where government or Nalcor recommended and sought specific conclusions to be changed. Toned down. Taken out entirely," said Des Sullivan, a member of the Muskrat Falls Concerned Citizens Coalition.

'Below industry norms'

By the time government accepted the report in late October 2012, just weeks before Muskrat Falls was sanctioned at a cost of $6.2 billion, references to project risks highlighted in draft reports were removed.

A reference to "major risks" associated with the transmission line related to labour availability, for example, and a reference to contingencies that were "below industry norms" did not make it to the final report.

"Now we hear the report was hardly objective by any standard," said Sullivan.

But Wilson said MHI may have overstepped its bounds, since it was not hired to do a risk analysis of Muskrat Falls.

'It's a little disappointing'

And in keeping with a pattern that's emerged throughout the inquiry, it appears Nalcor withheld some key information from the consultant that might have raised questions about capital cost estimates.

For example, the existence of a $500-million strategic reserve was not disclosed to MHI. This would have changed the cost estimates for Muskrat Falls.

"It's little disappointing," MHI's Allen Snyder testified when asked about the reserve.

Nalcor was also aware that it only had a slim chance of delivering first-power from Muskrat Falls in July 2017, as forecasted, yet also kept this information from MHI, according to testimony.

We would have then had a further look at the cost estimate and to see how much that might have added to the cost.- Allen Snyder

This would likely have changed the project estimates as well.

"We would have then had a further look at the cost estimate and to see how much that might have added to the cost," Snyder said.

Browne says PUB should have done the job

MHI was hired by government in the spring of 2012 to review two options for the province's future power needs: Muskrat Falls and the Labrador-island transmission line, or maintaining the Holyrood thermal power station and enhancing the isolated power grid.

The consulting company had previously been hired by the province's public utilities board to do the same review, but the PUB was unable to reach a conclusive answer, saying it did not have sufficient time or information.

Browne said Monday's testimony is further proof that the public utilities board, a quasi-judicial arm of government, should have been given more time to complete its report.

Meanwhile, the three officials from MHI will continue their testimony on Tuesday.