Muskrat's $300M question: Did senior bureaucrats withhold cost increase from finance minister?

A $300-million mystery is stirring up debate at the Muskrat Falls inquiry, with the man who once managed Newfoundland and Labrador's treasury testifying he was not aware capital costs for the project had grown significantly when it reached a critical milestone in 2013.

"I don't remember getting that information," former finance minister and premier Tom Marshall told the inquiry during a long day of testimony Monday.

"The question is, did somebody else give it to me? And I don't recall it. I can only remember what I remember."

At one point, Marshall's testimony prompted inquiry commissioner Justice Richard LeBlanc to ask, "If you were told there was a $300-million increase in the cost of a project like Muskrat Falls, would you not recall it today?"

"I think I would, yes," Marshall replied.

Politicians kept in the dark

It's a mystery that has dogged the inquiry since it began examining why there have been massive cost overruns and schedule delays on the controversial hydroelectric project.

And it's yet another example of what inquiry lawyers like co-counsel Barry Learmonth suggest is a failure on the part of the provincial government to provide adequate oversight of Nalcor, the Crown corporation leading the project.

Learmonth repeatedly pressed Marshall on the issue of oversight, with Marshall agreeing the province could have done a better job of monitoring Nalcor, and that a truly independent review of the project was never completed.

Muskrat, meanwhile, was sanctioned at a construction cost of $6.2 billion in late 2012, with an additional $1.2 billion for financing and other costs. A handful of prominent former politicians have testified in recent weeks they believed that was still the amount when the financing for the project, including a loan guarantee from Ottawa, was finalized a year later.

This is important because once the province agreed to the loan guarantee, it was locked into completing the project and picking up the tab on any cost overruns, regardless of the amount.

But the actual amount at so-called financial close was $6.531 billion, or more than $300 million more than Marshall and others believed to be the case.

That's especially eye-opening in Marshall's case, because he was the province's finance minister, the person charged with protecting the coffers.

So how is this possible?

And why might such important information be withheld from politicians like Marshall?

The answers to these questions are yet to be revealed, but it appears some very senior public servants in government were told by Nalcor that costs had grown.

Several documents entered into evidence, for example, show that then-deputy minister of finance Donna Brewer and other senior staff in the department were briefed by Nalcor just days before financial close.

And a report by the so-called independent engineer who was reviewing the project on behalf of the federal government was also made available to the provincial government through a secure "data room" where documents are shared with key partners on the project.

Again, this document contained a new "final forecast cost" of more than $6.5 billion.

Marshall said he never had access to the data room, and was not briefed on the report.

So the public was never told about the $6.5-billion figure, and neither, it appears, was the finance minister.

If somebody in government had it, I would have expected them to tell me. It's just I don't remember if anyone told me. And I don't have a document to show.- Tom Marshall

"There were a lot of meetings going on. If somebody in government had it, I would have expected them to tell me. It's just I don't remember if anyone told me. And I don't have a document to show," said Marshall under questioning from Erin Best, the lawyer representing former premier Kathy Dunderdale at the inquiry.

"Are you positive they didn't tell you" about the cost increase? Best asked Marshall.

"No," he replied.

Province commits to fund overruns

Under the terms of the loan guarantee, the full amount of any anticipated cost overruns had to be placed into a special bank account as security to ensure the province would not default on its financial commitment.

Might this have been the reason bureaucrats potentially withheld the information from Marshall?

The additional $300 million was identified midway through the 2013-14 fiscal year, so coming up with that money would have required the provincial government to approve what's called a supplementary supply of cash.

And there's evidence Brewer did not like this option.

One of the documents entered as evidence at the inquiry are handwritten notes from Derrick Sturge, Nalcor's chief financial officer. 

His notes from a Nov. 21, 2013, meeting of Nalcor and government officials attributes the following to Brewer: "Creates problem as NL has no approval for equity until April 1."

Coincidentally, evidence shows that the $6.5-billion figure became known to the finance department in March, just ahead of a new provincial budget in which additional money for the project was approved.

But Marshall refused to criticize the bureaucrats he depended on for information.

"I'm sure if they were aware of a higher number they would have brought it to my attention," Marshall said.

Brewer, meanwhile, is not on the list of future witnesses to give evidence at the inquiry, and it's unclear if she will be added.

Meanwhile, the extended testimony from Marshall meant another high-profile witness, former premier Kathy Dunderdale, was unable to testify on Monday. She is now scheduled to appear Tuesday morning.

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