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Auditor’s report doesn’t match what cabinet knew, Paul Davis tells Muskrat Falls Inquiry

Former premier Paul Davis (right) has a last-minute check-in with his lawyer, Tom Williams, prior to the start of his testimony at the Muskrat Falls Inquiry on Tuesday in Happy Valley-Goose Bay.
Former premier Paul Davis (right) has a last-minute check-in with his lawyer, Tom Williams, prior to the start of his testimony at the Muskrat Falls Inquiry on Tuesday in Happy Valley-Goose Bay. - Ashley Fitzpatrick

Affordability of power remained important, former premier says

HAPPY VALLEY-GOOSE BAY, N.L. —

Former premier Paul Davis said he was “shocked” to see some of the history on forecast costs for the Muskrat Falls project in the latest auditor’s report to the Muskrat Falls Inquiry.

The auditor’s report says just four months after the project was sanctioned by the provincial government at $6.2 billion (not including interest and financing), the project team should have known the bids were coming in higher than expected and, by April, the original contingency was exhausted.

Before financial close in November 2013, according to the team from Grant Thornton, everyone should have known there wasn’t enough in the budget.

But Davis said he didn’t know about it.

He was a cabinet minister at that time.

“The first time I knew of this is when I saw this report,” Davis said on the stand at the inquiry on Tuesday, suggesting if Nalcor Energy knew there was a material change in the outlook for the project, they kept it to themselves at that point.

On cross-examination, he acknowledged it was possible it could have been reported to someone else in the government without him knowing, but he was not told.

He was asked by inquiry co-counsel Barry Learmonth when he became aware of increases in the project’s cost estimate.

“It wasn’t until June 2014 that I became aware of $6.99 billion being the construction cost. However, this (report) is referencing $7 billion a year earlier. So it was 11 months later, in June 2014, before I became aware of it,” Davis said.

It has been suggested the difference in amounts – being project team forecasts versus an approved budget – is in some ways about knowns and unknowns, what can be said with certainty, while taking into account commercial sensitivities.

Lawyer Harold Smith, representing former Nalcor Energy president and CEO Ed Martin, pressed the idea, suggesting to Davis that if negotiations are ongoing on a major contract, a change in forecast cost, particularly if tied to that contract, would be commercially sensitive information.

“I get that,” Davis replied, in the context of an immediate disclosure to the public. “But would Nalcor sharing that information with the cabinet damage that as well?”

His question in reply was picked up by Learmonth, who raised it again on redirect. The inquiry lawyer wanted a firm response from Davis on disclosure of information. The former premier said he believed it should be the cabinet’s decision to release a new outlook to the public or not, but at the very least the cabinet should be informed of it at the earliest possible opportunity.

On other points, he was less certain. Citing the time passed, he couldn’t recall enough to answer some of the questions put to him. He couldn’t say exactly when, for example, he first learned the provincial government and Nalcor Energy were locked by financial agreements into completing the project. He said he did know at some point while he was still in office, but he didn’t know anything at the time the arrangements were being settled, before he was premier.

Davis became premier in 2014 and continued through to the November 2015 election, when the Liberals were voted into power under Dwight Ball. He worked from that point in his role as leader of the Progressive Conservatives, eventually stepping down (Ches Crobie was elected the next leader). He stepped down as Opposition House leader in May 2018.

He finished with provincial politics in October 2018, leaving his role as MHA for Topsail-Paradise.

Davis recalled meetings with Martin and former Nalcor Energy board chair Ken Marshall during his time as premier, but admitted he couldn’t give specifics on when they were and who was with him at different times. While he was premier, it wasn’t customary to have a clerk record notes at all meetings.

Before he finished on the stand, Davis was asked about affordability, the comparison of different power options, and the increase in cost after sanctioning. Basically, was there a price too high for the project?

“Yes,” Davis said. “Affordability is obviously a factor for the province and for the people who have to pay the bills.”

If the cabinet had known about the early spike in cost, he said, he believes the project would have received more scrutiny at that time. He can’t say if the ultimate outcome would have been different.

ashley.fitzpatrick@thetelegram.com


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