Muskrat Falls hydroelectric project clears major hurdle

Prime Minister Stephen Harper has announced a federal loan guarantee for the controversial Muskrat Falls hydroelectric project, clearing the final major hurdle to launching the hydroelectric project.

Harper announced in Happy Valley-Goose Bay, Labrador, this afternoon that the federal government has signed a deal with the governments of Newfoundland and Labrador and Nova Scotia, and their provincial energy companies, Nalcor and Emera.

"The Lower Churchill projects will receive the support they need to move forward, which will have significant economic and environmental gains due to a substantial reduction in greenhouse gas emissions," said Harper.

A number of politicians were on hand for the announcement, held at 5 Wing Goose Bay Military Base, including Newfoundland and Labrador Premier Kathy Dunderdale, Nova Scotia Premier Darrell Dexter, and federal cabinet ministers Peter Penashue and Peter MacKay

The guarantee will substantially lower the costs of borrowing for the project. It will cover project-related debt of up to $6.3-billion. It applies to the Muskrat Falls Generation Station, plus three transmission links, the Labrador transmission interconnection, the link from Labrador to Newfoundland, and the link from Newfoundland to Nova Scotia.

The loan guarantee will be valid for 35 to 40 years.

It will be managed by Natural Resources Canada, and the Government of Canada will will work with a financial adviser to "ensure that the support provided to the projects is financially responsible to Canadian taxpayers"

Dunderdale has said final approval of the guarantee will clear the way for what is called sanctioning of the project, or the formal green light.

Harper pledged the loan guarantee during the 2011 federal election campaign.

The guarantee effectively is the last piece of a complex puzzle that the Newfoundland and Labrador government has been assembling for years to generate power on the Churchill River and launch the $7.4-billion project.

Although the loan guarantee will substantially lower borrowing costs for the project, it will be up to the project proponents to seek other arrangements for the remaining $1.1-billion in financing.

But even without the loan guarantee, Newfoundland and Labrador was moving ahead with Muskrat Falls, to the consternation of opponents who see the project as financially ruinous or environmentally risky.

A group of protesters outside the gates of the base said earlier this afternoon that they were disgusted with what they called a lack of consultation over the entire Muskrat Falls project.

They have accused the federal and provincial governments of stealing from Labrador and not listening to various aboriginal groups.

"I think it's a slap in the face for the equality and justice that we as Labradorians have been seeking for many years," said protester Petrina Beals. "They're continuing to do the same things that they have done over the years and they're totally disregarding what's happening in our region, and not listening or talking to the people."

The Quebec government has also made it clear that it is furious about the loan guarantee.

Alexandre Cloutier, Quebec's intergovernmental affairs minister, said Quebec never received that type of help from Ottawa for its hydroelectric development.

"The federal government is acting against a Quebec interest using Quebecers' money to deploy a federal grant to Labrador and that will have a bad impact on the Quebec economy," fumed Cloutier.

He added that Quebec has been looking at its legal options to fight the deal.

Interprovincial politics have played a key role in Muskrat Falls, as Newfoundland and Labrador and Nova Scotia have partnered to find a way to deliver power to other markets while bypassing Quebec.

Earlier this year, Nalcor — Newfoundland and Labrador's Crown energy corporation — began clearing forests to build roads and infrastructure for the Muskrat Falls site outside Happy Valley-Goose Bay. Nalcor has argued that costs would mount substantially if it waited a year before launching that preliminary work.

It will take several years to dam Muskrat Falls and build a generating station, which will pump out 824 megawatts of power. Much of that will be funnelled by subsea cables from Labrador to Newfoundland, with as much as 40 per cent of the power marked to head to Nova Scotia by an additional set of subsea cables.

Halifax-based Emera Inc. is a partner in the Muskrat Falls project, and will be responsible for marketing its share of the energy.

Muskrat Falls has come in for steady criticism from a number of groups, some alleging that it has not undergone an independent review through the Public Utilities Board, which ruled this winter it could not proceed because Nalcor had turned over too little information in time for it to meet a government-imposed deadline.

Other concerns have been raised about whether Newfoundland and Labrador, which is poised to launch the most expensive project in its history, can afford the debt load that will come from the project, and whether ordinary ratepayers will in effect be footing the costs of the project.

As well, the leaders of Newfoundland's Liberal and New Democratic parties have threatened to filibuster technical legislation that will need to be introduced to clear the way for Muskrat Falls.

They have also criticized Dunderdale for setting only a couple of hours for formal legislative debate of Muskrat Falls, and at that through a private member's bill.

But Dunderdale, who has said Muskrat Falls has undergone intense scrutiny by experts and the public, has consistently said Muskrat Falls represents the cheapest option to supply power to Newfoundland and Labrador consumers.

The government has launched a public relations campaign to help persuade the public that Muskrat Falls represents a stable source of renewable energy that will be cheaper than relying on alternatives, including burning oil at the Holyrood generating station the government would soon like to decommission.

Muskrat Falls has been more than three decades in the making, and is a key part of what is known as the Lower Churchill energy project. The current plan does not involve another site at Gull Island, which if developed could generate substantially more power.

Newfoundland and Labrador has had a strained relationship with Quebec for decades, due largely to the 65-year contract with Hydro-Quebec over the Churchill Falls generating station. Under that deal, which expires in 2041, Newfoundland and Labrador sells power at a flat, inexpensive rate to Quebec, which has been able to resell the power to other markets while keeping the profits.