Muskrat Falls fiasco shows need for public ownership and control of energy industry

PV Atlantic Bureau

As People’s Voice goes to press, the government of Newfoundland and Labrador is set to release the report of its inquiry into the troubled Muskrat Falls hydroelectric project. The inquiry was tasked with investigating costs for the huge development, which have more than doubled since 2010 to nearly $13 billion and account for one-third of the province’s debt.

Anticipating a damning report – some witnesses to the inquiry said former premiers and many officials intentionally downplayed estimates and denied key information about risks – the federal and provincial governments jointly announced last month a refinancing plan that shields taxpayers from cost overruns. However, the details of this plan remain vague – what is clear is Ottawa’s expectation that the main problem is Newfoundland and Labrador’s to deal with.

The Muskrat Falls project was first proposed by the Conservative provincial government of Danny Williams in 2010, to bring Labrador hydro power to the Island of Newfoundland and to Nova Scotia.

Labrador’s population is small but includes a very high proportion of Indigenous people – over 42 percent according to the 2011 Census. Hydro exploitation there, which is produced through flooding of traditional hunting land and threatens to increase mercury levels in fish, has shown little concern for Indigenous land rights. These projects create a class and social divide since people in the region are in need of jobs, and the industrial developments pay very well in a region that is expensive to live in due to its remoteness and harsh climate.

Progressive voices in Labrador rallied in defence of the land as construction continued in earnest, with Inuit and Innu protesters at the forefront. The Labrador Land Protectors famously blockaded the site in 2016, with some occupying it until police forced them to leave. Several protesters were charged and some jailed.

Most people in Newfoundland and Labrador are deeply concerned about how the project will affect their own living costs. The ballooning expense is partly due to delays, but also because private contractors milked provincial money – the main contractor, construction multinational Astaldi, had no experience building in Labrador’s conditions and much of its work had to be redone due to improper construction. Ottawa has provided a loan guarantee of up to $9.2 billion, but there are concerns that as Nalcor Energy (the public energy corporation which manages the province’s energy resources) tries to recoup costs, it will nearly double rates to 23 cents/kw hour. A rate increase of this magnitude would be devastating for working people throughout the province.

The risks of this happening are compounded by the involvement of Newfoundland Power, the private corporation which is the energy distributor for 90% of the population. A subsidiary of huge transnational Fortis, Newfoundland Power made profits of $54 million in 2019 and has a regulated rate of return of just over 7 percent. The company’s financial statements indicate that without this guaranteed rate, it would have had a net loss in 2019. At the Muskrat Falls inquiry, Newfoundland Power appealed strongly for mitigation that strengthens its monopoly and its ability to make huge guaranteed profits. So, public money gets used to buy public support to secure private profit.

What is needed is a solution that combines and prioritizes Indigenous land rights, climate justice and the needs of the working class.

Living costs in Newfoundland and Labrador are already too high, and wages too low, to expect working people to pay even more. Research from the Canadian Centre for Policy Alternatives (CCPA) shows that over 22 percent of people in St. John’s are living in poverty and that the province-wide child poverty rate is 20 percent. The gender pay gap is one of the largest in Canada, with women earning 66 cents for every dollar a man earns. Food is more expensive than in any other province in the country, and over 13 percent of households experience food insecurity. While the minimum wage will move in April from $11.40 per hour to $11.65, CCPA calculates that the living wage for full-time work in St. John’s is $18.85.

This project is a debacle that highlights the failures of the private sector. While power generation is publicly-owned, a private entity that needs to produce profit to please shareholders is responsible for distributing electricity to almost the entire population. This situation is unacceptable – Newfoundland Power should be placed under public ownership and democratic operation.

Furthermore, the situation shines a light on the failure of the provincial government to implement progressive tax reform, which would provide greater revenue by taxing corporations and the very rich. While the oil sector brings in important royalties, the lion’s share of revenue goes to the oil companies. On top of this, Danny Williams’ tax cuts in the mid-2000s have resulted in billions of lost revenues.

The project represents a tremendous missed opportunity to develop alternative green energy in the province. Government and industry rhetoric have been misleading on this issue, calling the hydroelectric megaproject green while ignoring its negative environmental effects. Greenhouse gas emissions from dams – particularly methane – have been proven to be 25 percent higher than previously understood, but proponents of these projects ignore this. Furthermore, flooding hydroelectric reservoirs increases the production of methylmercury, a neurotoxin that accumulates in fish, seals and birds.

Like the Site C dam in British Columbia, Muskrat Falls was also a missed opportunity to put into action a meaningful effort toward reconciliation with Indigenous nations. Instead of meaningful consultation, the provincial government established the Independent Expert Advisory Committee (IEAC) to review the project’s impact on traditional foods and Indigenous peoples’ health. APTN News reported in February 2019 that the IEAC included “advisors” who disputed a peer-reviewed scientific report that indicated the project would increase mercury levels. Rather than seeking consent from the Inuit and Innu, on whose traditional lands the dam was built, the government arrested and jailed Indigenous protesters.

Whatever the Muskrat Falls inquiry report says – all six volumes of it – this fiasco clearly demonstrates the need for public ownership and democratic control of the energy industry. This includes all elements of the industry, from production to distribution to transmission. Anything less will fail to reach even the minimum standards of social, economic and environmental responsibility.


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