'Abdicating its responsibility': Muskrat concern by mid-level bureaucrats never reached the top

New evidence at the Muskrat Falls inquiry shows mid-level bureaucrats in the Finance Department were pushing for a broad review of the controversial project before it was sanctioned in 2012 — but their concerns did not reach the top public servant in the department.

There's also evidence that an independent review of Muskrat that was recommended by the departments of Finance and Natural Resources was never carried out.

These were some of the revelations from the inquiry Monday as Terry Paddon, deputy minister of finance from 2004 to mid-2012, took the witness stand.

'Potential burden to taxpayers'

A January 2012 "information note" prepared by three officials raised serious concerns about Muskrat Falls, stating government was "abdicating its responsibility" to the people by limiting the scope of a review by the Public Utilities Board (PUB).

The trio also recommended that sanction of Muskrat Falls be delayed one or two years to "allow a full assessment of alternatives and a complete analysis of the potential burden to taxpayers if development of Muskrat Falls has substantial cost overruns."

Paddon said he never became aware of the note until he was interviewed by inquiry co-counsel Barry Learmonth this past summer.

The document was prepared by "W. Tymchak," "M. O'Reilly" and "K. Hicks" on Jan. 19, 2012, just under a year before Muskrat was approved by the provincial government.

There's no approval signature on the document from anyone at the executive level, and Paddon said it never crossed his desk.

"They may have drafted the note and it would have gone into the filing system, but if the (assistant deputy minister), who it doesn't appear had approved it, he might not have moved it along to me," Paddon testified.

PUB fails to reach a conclusion

The note was prepared as the PUB was struggling to conclude a review of whether Muskrat Falls or maintaining the isolated island power grid was the least-cost option for the province's future electricity needs.

The bureaucrats criticized that review as "too narrow in scope to be informative and any meaningful way," and that it should be expanded to include "all possible options to supply Newfoundland and Labrador with the lowest electricity prices to meet future demand."

But this advice never reached Paddon, and it was never acted upon.

The PUB finished its report two months later, and could not reach a conclusion as to which option was the least-cost, saying it was not provided with enough information by government-owned Nalcor Energy.

Despite this, the Progressive Conservative government of then-premier Kathy Dunderdale sanctioned the project by the end of 2012 at a construction cost of $6.2 billion, and with first power from Muskrat scheduled for July 2017.

But costs have since soared by more than 70 per cent, first power is now delayed until sometime next year, and an expensive public inquiry led by commissioner Richard LeBlanc is now trying to determine what happened.

Ron Penney, chair of the Muskrat Falls Concerned Citizens Coalition, described the note as astounding.

"This is the first instance where we've actually seen some push-back from the public service, and the deputy minister says he never saw it," said Penney, whose group has full standing at the inquiry.

"It was good to see there was at least somebody who was taking a position that they needed to put a pause on this project."

An ominous tone

More than six years later, the information note strikes an ominous tone, stating Muskrat has the potential to saddle government with a "massive unnecessary debt burden" and that a broad review should be commenced so government could be "absolved of any responsibility" if things went wrong.

When asked how he felt about the note, Paddon said "at that point in time, I think we were happy with the (PUB review) as it was."

But Paddon said he was not entirely offside with his staff.

Another document entered into evidence Monday shows the departments of Finance and Natural Resources had recommended a company called Independent Project Review, experts in major project delivery, be hired to assess Muskrat Falls.

The "decision note" was signed by top bureaucrats in both departments, including Paddon, and the cabinet ministers responsible for the departments, former PC MHAs Tom Marshall and Shawn Skinner.

'I just can't remember'

But Learmonth told the inquiry Monday there's no evidence it was ever completed, and Paddon said he did not know if the review was carried out.

"I think this just didn't go anywhere," said Paddon, adding, "Ultimately this would have gone to the premier's office."

When asked if he was disappointed about this, Paddon replied, "I don't recall what my view was at the time. I just can't remember."

Paddon left finance in mid-2012 to serve as the province's auditor general, and retired from government a year ago.

'Shocking and disgraceful'

At one point, Learmonth stated an independent review of the cost estimates for Muskrat was not done, and said senior officials in government were "with great gullibility, swallowing whole all of the project cost estimates by Nalcor."

To that, Paddon replied, "Perhaps."

Penney said Paddon's testimony is a "shocking and disgraceful indictment of our public service."

The government of the day ought to have gone outside of Nalcor to seek truly independent advice on the advisability of going ahead with this project,  and that never happened, and the senior public servants failed us because they didn't insist that that happen.- Ron Penney

Muskrat Falls is the most significant financial gamble in the province's history, and "our senior public servants seemed to be totally compliant to the wishes of Nalcor," said Penney.

"The government of the day ought to have gone outside of Nalcor to seek truly independent advice on the advisability of going ahead with this project," Penney added, "And that never happened, and the senior public servants failed us because they didn't insist that that happen."

Penney said Paddon, as the top finance official in government, "didn't do a good job of protecting us."

Read more stories from CBC Newfoundland and Labrador