A dramatic change in leadership at Nalcor Energy has cast doubt on the future of the $9.2-billion Muskrat Falls hydroelectric project, but it may be too late to pull the plug on the controversial Labrador megaproject.
Newfoundland and Labrador Premier Dwight Ball announced on Thursday that former Fortis Inc. president Stan Marshall has been appointed to take over at the Crown corporation from long-time chief executive officer Ed Martin, who resigned on Wednesday after facing criticism for cost overruns and delays in the project. The entire board of directors also resigned.
In a news conference on Thursday, Mr. Marshall said he would launch a full review of the 824-megawatt project on the Lower Churchill River. When completed, it would provide power to the island of Newfoundland, as well as to Nova Scotia and export markets through a subsea cable.
The retired executive from Fortis, a St. John's-based utility conglomerate, said he was never a fan of the Muskrat Falls deal. He would not say whether stopping the project is a possibility. "There's always a point in any project where the cost of going forward is not worth it. … [It's] hard to say," Mr. Marshall told reporters in St. John's.
But it is likely too late to turn back, Wade Locke, an economist at Memorial University of Newfoundland in St. John's, said in an interview.
Nalcor has already spent more than $4-billion on the construction of the Labrador generating station and transmission lines, and has deals with suppliers and contractors that would trigger large penalties – and potentially lawsuits – if they were cancelled. It also has $6.3-billion in federal loan guarantees.
"It's pretty close to impossible not to do it," said Mr. Locke, who has supported the project as the best way to supply clean power to the province. "At the end of the day, it is difficult to see that this project will not proceed. … I would think the consequence of not doing it would be more severe than the consequences of doing it."
Nalcor's partner, Halifax-based Emera Inc., is responsible for linking Newfoundland and Nova Scotia by way of a $1.6-billion cable under Cabot Strait. In a 35-year contract with Nalcor, publicly traded Emera, which owns Nova Scotia Power, committed to 20 per cent of the cost of the overall project in exchange for 20 per cent of the electricity output.
By the end of December, it had spent $570-million on the link. Emera forecasts an additional $250-million in spending in the first six months of this year, and company spokeswoman Neera Ritcey said Thursday that it remains committed to the project.
"Throughout the maritime link project, we have had a positive working relationship with our partner and the government and we fully expect that will continue," Ms. Ritcey said.
Emera's work is on budget and on schedule to be completed in late 2017, though completion in Newfoundland has been pushed back to 2018.
Nova Scotia Premier Stephen McNeil has pointed to Emera's investment in Muskrat Falls as a critical element to the province's plan to reduce coal-fired power and meet its ambitious greenhouse-gas reduction targets.
In the news conference in St. John's, Mr. Ball acknowledged that it may be difficult to stop the project now, but he said he would wait for Mr. Marshall's advice on "how to get Nalcor back on track." The Liberals, who replaced the long-reigning Conservatives last fall, supported the Muskrat Falls deal when they were in opposition, but they have raised concerns about the problem-plagued project.
A review by EY (formerly Ernst & Young), concluded last year and released last week, contained a litany of criticisms about the project management. As well, the prime construction contractor, Italy's Astaldi SpA, has had disputes with its suppliers.
Mr. Martin was at the helm of Nalcor since it was created by former Conservative premier Danny Williams to develop the Lower Churchill and lead the province's efforts to gain a share of offshore oil projects. He hoped to complete Muskrat Falls and then develop the much larger Gull Island hydroelectric site for export to American states that are eager to buy clean power in order to reduce greenhouse-gas emissions.