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A Canadian energy project failure: Muskrat Falls and where it went wrong.

Muskrat Falls is a waterfall in Labrador's Churchill River, 25 kilometres west of Happy Valley-Goose Bay. The Muskrat Falls project has been called “the biggest economic mistake” in Newfoundland and Labrador's history. The cost for the project is about double the projected estimates — $12.7 billion, almost the size of the net provincial debt.


The project was first pitched as a hydroelectric megaproject called the Lower Churchill Project. The Falls were supposed to be a “green” source of energy, intended to replace the generating station in Holyrood, which burns 20,000 barrels of oil every single day and emits a million tonnes of greenhouse gases each year. The province also intended to sell the excess energy to different Canadian and perhaps even American markets.

Sounds great, so what happened?


It is difficult to compile a concise summary of all issues with the Muskrat Falls project, but this will provide an overview of the major implications:

  1. Indigenous groups in Labrador protested the project, stating that the environmental assessment process was weak and that the project will expose people living downstream of the site to methylmercury poisoning. A number of scientists agree with them. This was ignored!

  2. The increased costs of the project could wind up doubling electricity rates if something isn't done.

  3. Astaldi, the company hired as the project's contractor, filed for bankruptcy and had to be replaced.

  4. The public was told the bill would be $6.2 billion. The fact there was another $1.2 billion for interest during construction on top of that was not talked about.

  5. A geotechnical review of sub-surface conditions along the route was not done, and this resulted in a requirement to install many expensive foundations for the steel towers that were originally budgeted. This oversight was largely the reason why costs for the line soared by roughly $650 million.

The impacts


The impact of Muskrat Falls costs on public services will be determined by political choice. The government claimed, "Newfoundlanders and Labradorians will not bear the cost of Muskrat Falls.” However, that is not the case.


The government’s current plan revolves around mitigating electricity rate increases to zero and then filling in the financial gap. The government also made the political choice not to use tax increases to fill the gap. It appears the government is choosing cuts to infrastructure programs, and services.

It cannot be certain where the $600 million in cuts will come from, but slashing that amount would have far-reaching impacts, especially considering the recent impacts of the pandemic. If history prevails, It could mean:

  • Cutting hospitals and healthcare workers.

  • Cutting K–12 teachers and schools.

  • Cutting transfers to low-income seniors, individuals, families, and persons with disabilities.

  • Eliminating all investment in new and existing schools, healthcare facilities, postsecondary institutions, roads and bridges, justice facilities, affordable housing, and municipal infrastructure.

According to a July 2021 report, the government can do much better to mitigate the impacts of this project on its local communities. Some alternatives outlined in the report include:

  • Including appropriate costs in electricity costs - Nobody wants to pay higher rates, but the fact is that being more transparent and honest is in the public’s best interest.

  • Promoting and implementing energy efficiency in homes, buildings, etc - Insulation and weatherstripping is an investment, and payback times are generally a few years.

  • Using electricity more widely - Handing less money over to foreign-owned oil corporations, and instead on locally generated electricity.

As shown above, there are more balanced and innovative ways to pay for Muskrat Falls. The government can choose a path that is fairer, better for jobs and the economy, and would help to achieve the province’s climate change goals.

 

Jasmeen Bhangu