The Muskrat Falls hydroelectric project in Labrador needed a federal guarantee to get off the ground, which in itself testifies to its iffy economics, writes Konrad Yakabuski for the Globe and Mail. Now, he says, Newfoundland’s shrinking population, faces paying for the $7.7-billion project – currently behind schedule and over budget – in more ways than one.
By Konrad Yakabuski, published by the Globe and Mail on December 17, 2015
The Muskrat Falls hydroelectric project in Labrador was always destined to define the political legacies of the politicians who championed it. As by far the biggest capital undertaking in Newfoundland and Labrador history, it would either enrich the province as a North American clean-energy power provider or saddle it with a Hoover Dam-sized debt it would long regret.
The skeptics hovered long before oil and gas prices tanked, leaving the provincial government facing massive deficits far into the future and dismal prospects for fetching premium prices for the project’s power on export markets. Newfoundland taxpayers risk paying for Muskrat Falls in more ways than one.
The $7.7-billion project also risks burdening Canadian taxpayers, who, thanks to the federal loan guarantee on $5-billion worth of Muskrat Falls bonds, are responsible for repayment should the provincial entity that issued them default. That, thankfully, is not an immediate concern. But that a federal guarantee was needed to get this project off the ground in itself testifies to its iffy economics.