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Muskrat Falls Fiasco: Ottawa Offers NL Debt Relief

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Last Thursday, as bills for the overdue and off-budget Muskrat Falls hydroelectric project finally came due, Prime Minister Justin Trudeau announced that the federal government was deferring $ 844 million in payments from Newfoundland and Labrador. This was good news for Newfoundland and Labrador Premier Andrew Furey, who faced the daunting task of borrowing money in bond markets where the province has not been. able to raise funds last March. In an interview with the allNewfoundlandLabrador economic news publication, Premier Furey said, “It’s a giant anchor around our collective souls. “

What is not clear from the Prime Minister’s remarks is what might accompany the lifeline he threw at the rookie Premier of Newfoundland and Labrador. The negotiations, which were previously described as seeking a way to prevent electricity rates from doubling in the province, are now described as work “on the financial restructuring of Muskrat Falls” and on “the next steps to support the Atlantic loop. “

The Atlantic Loop, in case you missed a one-line reference in last September’s Throne Speech, is a grand plan “that will connect surplus clean energy to regions in transition away from coal.” Translated, this means major investments in infrastructure to replace coal-fired electricity in the Maritime provinces with hydroelectricity from Quebec and Labrador. The benefits to Newfoundland and Labrador, other than alleviating the potentially overwhelming costs of the Muskrat Falls project, are uncertain. When asked if there was no Muskrat Falls deal without an Atlantic Loop deal involving the premier of Quebec, Furey said: “Even if they don’t exclude each other not mutually, they are not necessarily in tandem or in parallel, but they exist simultaneously in the same set of negotiations. I’m sure Mr. Dupont and Mr. Paddick will undertake.

Mr. Brendan Paddick is the former Chairman of the Board of Directors of Nalcor, the provincial Crown corporation that owns the Muskrat Falls project, and Mr. Serge Dupont is the federal government negotiator. Mr. Dupont’s appointment signals a transfer of the Muskrat Falls file from the Federal Ministry of Finance to the PMO. It also indicates the weight that the Prime Minister gives to the file.

Serge Dupont is a former Deputy Clerk of the Privy Council and former Deputy Minister at the Department of Natural Resources from 2010 to 2014. Since Mr. Dupont was Deputy Minister in 2011 when former Prime Minister Stephen Harper accepted a guarantee loan of $ 6.4 billion. for Muskrat Falls, he knows the project intimately.

The day after the Prime Minister’s announcement, the Bloc Québécois gave a foretaste of what awaits Mr. Dupont. In a press release entitled “Quebec does not have to finance the Muskrat Falls fiasco,” BQ spokesperson for natural resources, Mario Simard, deplored the new financial support for Muskrat Falls by declaring: ” Quebecers should not have to put a penny in this financial abyss designed to compete with Hydro-Quebec.

Most Newfoundlanders and Labradorians would agree with Mr. Simard that the Muskrat Falls project is a fiasco and, while it may hurt those who think Hydro-Quebec has Unjustly reaped the benefits of the massive, decades-old Churchill Falls hydroelectric project, it is clear that Muskrat Falls electricity is destined for export markets competing with Hydro-Quebec. The BQ’s position is that Ottawa’s support represents “unfair competition with our own money”.

In 2011, Quebec opposed Stephen Harper’s decision to guarantee what was then wrongly planned as a hydroelectric project worth more than $ 6 billion. Mr. Harper later agreed to transfer $ 2.2 billion to Quebec as compensation for the harmonization of the GST 20 years earlier. Of course, some thought it looked like a reward.

Premier Andrew Furey, who is due to call a provincial election in 2021, said: “We have to make sure that we deal with Muskrat Falls first, while creating – I think we can – creating responsibly, we can be a green battery helps remove Atlantic Canada and maybe even eastern Canada from coal and other unclean energy sources. In time, what the Prime Minister may find out is that deferring the initial payment of $ 884 million was the first step and that there is no second step without a much bigger deal with Atlantic. Loop.

Whether negotiations are still in the early stages or advanced, what Andrew Furey faces is part of Confederation realpolitik. Newfoundland and Labrador is negotiating from a position of fiscal weakness and one of the parties in the larger and more ambitious Atlantic Loop talks is powerful and has already played this game skillfully and successfully. .

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