Tentative loan guarantee for Muskrat Falls - Metro US

Tentative loan guarantee for Muskrat Falls

ST. JOHN’S, N.L. – A tentative deal that would see Ottawa provide a loan guarantee for the proposed $6.2-billion Muskrat Falls hydroelectric project in Labrador was dismissed Friday by critics as little more than political window dressing, weeks ahead of a provincial election.

The governments of Newfoundland and Labrador, Nova Scotia and the federal government signed a memorandum of agreement that puts in writing a promise made earlier this year by Prime Minister Stephen Harper to support the massive power project.

Federal Natural Resources Minister Joe Oliver couldn’t say how much in savings would result from the loan guarantee, adding that Ottawa must first hire financial advisers to help finalize the agreement by Nov. 30.

“We are committed and now we are working on the specific mechanics,” Oliver told a news conference in St. John’s.

“Bottom line, our support for the Lower Churchill River projects will boost clean energy production, grow our economy and strengthen our status as a global energy superpower.”

The lack of specifics set off a torrent of criticism from Newfoundland’s opposition parties, which are gearing up for an election set for Oct. 11.

The deal is merely “an agreement to agree,” shrugged NDP Leader Lorraine Michael, who wondered aloud what has happened since Harper committed in March to back Muskrat Falls during the federal election campaign.

“Work that we thought was happening in actual fact wasn’t happening,” Michael said in an interview.

“We were led to believe by the premier that this kind of work was actually going on.”

In June, Premier Kathy Dunderdale — who voiced her support for Harper during the federal election campaign — said she was hopeful that a loan guarantee would be concluded by summer’s end.

“I think he’s giving back in kind,” Michael said. “I scratch your back, you scratch mine.”

Provincial Liberal Leader Kevin Aylward said he too wondered why more work on the deal hasn’t been done yet.

“This is not a legally binding offer and the Harper government can still back out of it,” Aylward said in a statement. “It’s no wonder Premier Kathy Dunderdale didn’t show up for the press conference.”

Within a couple of hours of the signing of the tentative agreement, Dunderdale — who was in Labrador to make four local announcements — took to Twitter to offer a rebuttal.

“To the naysayers — every major project for N.L., Hebron and others was secured with MOA/MOU,” she tweeted.

Newfoundland and Labrador Natural Resources Minister Shawn Skinner said the loan guarantee would result in reduced interest rates for borrowing, thereby lowering costs.

He said there would be no fees paid for the guarantee, which would extend to both the construction and post-construction periods for the project.

The government of Quebec has vigorously opposed any federal support for Muskrat Falls, saying it would amount to an unfair subsidy and encroach upon provincial jurisdiction.

On Friday, Quebec expressed further outrage over what it called a federally funded advantage given to Newfoundland’s hydro industry.

“Quebec is not alone in its reaction,” said Intergovernmental Affairs Minister Pierre Moreau, alluding to complaints from other provinces. “(It’s) completely unacceptable.”

He said the blow is doubly painful, given that Quebecers’ own taxes could be used to finance competing hydro projects. He called federally subsidized hydro a first in Canada and suggested the sums would be astronomical if Ottawa did the same favour for every province.

“We’ve always been very worried about this attitude from the federal government…. It’s trying to slide this by under the guise of environmental announcement — but it’s the financing of a dam, while Quebec has always paid for its own dams by itself.”

Under the conditions of a term sheet announced last year to develop the project, Nalcor Energy, 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.

A transmission link from Labrador to Newfoundland would cost $2.1 billion, $600 million of which would be provided by Nova Scotia-based private utility Emera (TSX:EMA). It would include a 30-km subsea connection across the Strait of Belle Isle.

Emera would also fund a 180-km subsea link between Cape Ray, N.L., to Lingan, N.S., at a cost of $1.2 billion.

Nova Scotia Natural Resources Minister Charlie Parker said he believes Friday’s agreement would result in millions in savings for people in his province too.

“That’s something the financial advisers will have to determine,” Parker said. “But I understand it will be a significant saving and that saving will go directly to the ratepayers and not to Nalcor or Emera.”

If it proceeds, 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.

Proponents say they hope to have energy flowing in 2017-2018.

The project has been on the drawing board in one form or another for decades. In 1980, it passed an environmental assessment but was set aside due to concerns over market access and financing.

Concerns over the loss of habitat that would result from the development of the project have also stalled its progress in the past. But Nalcor has promised to develop a compensation plan to make up for that.

The desire to build more power plants on the Churchill River in central Labrador can be traced back to 1972, when the Churchill Falls hydroelectric dam was finished with Quebec’s help.

— By Keith Doucette in Halifax

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