Premiers Dunderdale, Dexter say $6.2B cost will rise but stand by Muskrat Falls

ST. JOHN’S, N.L. – Labour and inflation costs will drive up the estimated $6.2-billion price tag for the proposed Muskrat Falls hydroelectric project in Labrador but Atlantic premiers Kathy Dunderdale and Darrell Dexter are standing by the deal.

“I can tell you there’s nothing startling in terms of the information that we’ve had so far,” Dunderdale, premier of Newfoundland and Labrador, told reporters Thursday after meeting in St. John’s with Dexter, her counterpart for Nova Scotia.

“There’s nothing unexpected (and) nothing to panic about or be unduly alarmed about.”

Dunderdale said estimated expenses for the Muskrat Falls project jointly planned by provincial Crown corporation Nalcor Energy and Nova Scotia’s private utility Emera are now almost two years old.

“So costs certainly would have changed but they would have changed for all of the alternatives as well,” she said.

Dunderdale said new estimates and an analysis by Manitoba Hydro International will be released later this summer, giving opposition Liberals and New Democrats time to prepare for a promised debate on Muskrat Falls this fall in the legislature. The Progressive Conservative government will then decide whether to officially sanction the project.

But both Dunderdale and Dexter voiced unwavering support for a development they say will benefit Atlantic Canada for decades after its dam and subsea transmission lines are built.

Dexter said rising price projections are worrisome, but he stressed that Muskrat Falls is still a good project for his coal-reliant province.

“Whenever costs go up there’s always a concern and you always take that into account,” he told reporters following the afternoon meeting at Dunderdale’s office in the legislature.

But Dexter said the cost of coal has shot up by 75 per cent in recent years as his province has been chained to the volatile international market for fossil fuels.

“Here is this project that we have that can provide stability because we’re going to know what the input costs are upfront. And that will provide stability for many, many years.”

As questions escalate in Newfoundland and Labrador about potential cost overruns and higher utility bills, Dunderdale said it’s important that the province control its own energy “destiny.”

Any cost increases for Muskrat Falls would be almost the same effect for wind projects or for refurbishing an oil-fired power plant in Holyrood, N.L., Dunderdale said of alternatives to Muskrat Falls often cited by critics.

Dexter said earlier in the day that the plan to harness power from the lower Churchill River in Labrador is still the most effective way to bring power to his province.

“We’ve already looked at that and we’ve done studies that look at the delivery of power to Nova Scotians,” he said in Halifax.”And the most effective way of doing that is through a project like the Lower Churchill.”

The premiers said the meeting was one of several regular sessions to talk about Muskrat Falls and other regional issues as Dexter prepares to welcome the other premiers at a Council of the Federation meeting July 25-27 in Halifax.

Critics of Muskrat Falls pounced back in January when Nalcor and Emera missed a second deadline to finalize a term sheet for the project.

Dunderdale said due diligence is more important than artificial timelines but that the two sides are “considerably closer” to an agreement. A deal will be done before her government debates Muskrat Falls this fall, she said, “sometime before November, I hope.”

As part of the proposal to build the project, a 180-kilometre subsea cable link would be built between Cape Ray, N.L., and Lingan, N.S. The cost of that has been estimated to be $1.2 billion.

Under the conditions of a term sheet announced in 2010 to develop the project, Newfoundland and Labrador’s Crown energy company would spend $2.9 billion to build a power generating facility at Muskrat Falls capable of producing 824 megawatts of electricity.

The project would provide Nova Scotia with 170 megawatts of energy annually — about eight to 10 per cent of the province’s total power needs — for 35 years.