'Something gone awry': Did Nalcor remove Muskrat costs to win support in Nova Scotia?

The former CEO of NalcorEnergy denies that the Crown corporation"consciously" lowered cost estimates for Muskrat Falls in order to win support for the controversialproject in Nova Scotiaand did so at the request of its Nova Scotia partner.

"There's a lot of evidence to come," Ed Martin toldCBCNews on Tuesday.

"This issue is going to be addressed clearly. I'm just asking people to wait for all the facts to be on the table and I'm confident it will be clear."

That premise was first disclosed by Barry Learmonth, co-counsel at the Muskrat Falls inquiry, during cross-examination of former premier Danny Williams during testimony in St. John's on Monday.

Learmonthasked Williams if he was aware that Nalcor executivesremoved a $300-million strategic risk reserve from the cost estimates just prior to a big milestone for the project in 2010, just months before Williams left politics.

"I don't know the circumstances of what you're talking about," Williams replied.

Emera worried about regulator approval

Learmonth then went into greater detail about the information he learned frommembers of the Nalcor project team.

Learmonth said "Nalcorexecutives, not the project team, made aconscious or deliberate decision to remove the strategic risk reserve" just prior to the announcement of a deal between Nalcor and Nova Scotia's Emera Inc. to partner on the Muskrat Falls project in November 2010.

The capital cost estimate for Newfoundland and Labrador's share of the project at that time was $5 billion. That figure grew to $6.2 billion by the time it was sanctioned in 2012, but has since swelled to $10.1 billion. When financing costs are factored in, the total cost is near $13 billion.

A weakened bargaining position?

Learmonth, meanwhile, saidNalcormade the decision to remove the reserve at the request of EmerabecauseEmera was concerned about getting approval for the project from theNova Scotia Utility and Review Board, which regulates electric utilities in that province.

"You can accept these as being facts," Learmonthsaid to Williams.

ThenLearmonth madethis statement:

"If one partner (is) saying 'remove this from your cost estimate to make it easier for us to sell this to the regulator,' I suggest that's an early warning sign that there's something gone awry in the negotiations.

If one partner (is) saying 'remove this from your cost estimate to make it easier for us to sell this to the regulator,' I suggest that's an early warning sign that there's something gone awry in the negotiations.- Barry Learmonth

"I suggest that signifies an imbalance or a weakness on Nalcor's part in the negotiating position it was taking with Emera," Learmonth added.

Williams said, "That's a stretch for me."

But again, Williams said he was unaware of the situation, and said if he were, "obviously I would have disclosed that."

When challenged further, Williams expressed his full support for former NalcorCEO Ed Martin, who left the position under a cloud in April 2016 amid skyrocketing costs and schedule delays.

Williams said Martin and his team negotiated "some very strong deals" for the province with oil companies that will contribute "tens of billions of dollars" to the province.

"I know Mr. Martin and/or people that were with him to be very competent, very thorough, very tough negotiators," Williams added.

Learmonth's revelation once again has critics of Muskrat Falls crying foul.

"That's a serious problem. We need to get to the bottom of that," Ron Penney, a member of the Muskrat Falls Concerned Citizens Coalition, said afterwards.

Penney said the project was also sold to the people of Newfoundland and Labrador based on those cost estimates, and "that figure was clearly, clearly wrong."

Penney said it's further proof that Nalcor was playing by its own set of rules.

"I think what's happened is that Nalcor became a very big company, and kind of pretended to act as if they were a private company. It looks like they bypassed all the normal kind of checksand balances," said Penney.

Williams, meanwhile, will continue his testimony today before the public inquiry.

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