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The $700M Question



Why did we pay Astaldi Construction more than $700 million in additional construction fees? Why have we not paid $700 million recommended to mitigate methylmercury production?



09.05.18





In December 2013, Nalcor, the Crown corporation overseeing the Muskrat Falls project, awarded the contract for construction of the dam to the Italian construction firm, Astaldi, for a project cost of over $1 billion (2013, CBC News).



Astaldi is a world leader in this industry, and has constructed 68 dams around the world from Egypt to El Salvador, but had no experience working in cold-climate environments like Labrador., which caused considerable difficulties in the initial phases of construction (CBC News, 2016; Astaldi, 2018).


In December 2016, Nalcor’s CEO, Stan Marshall, announced to the province that Astaldi is behind schedule because of challenges adding to the cost and was seeking extra fees for completion of the project. From that interview, CBC reported that, “Astaldi was partly to blame for cost overruns on the Muskrat Falls project, adding the Italian company had little experience working in a cold, northern climate” (CBC News, 2016). According to CBC, Marshall's position was that Nalcor had honored its commitments and he wanted Astaldi to do the same. Though it clearly did not believe the fees were justified, in the end Nalcor agreed to pay Astaldi more.



Because Nalcor has been given the right to withhold corporate information, we do not know what the terms of the agreement reached with Astaldi are





but we do know that the fees paid to Astaldi increased from an initial amount of about $1.1 billion agreed upon in 2013, to 1.83 billion in 2016 (Boone, 2016a; Cooke, 2016). To accommodate these and other expenses, in November 2016, the federal loan guarantee was increased by an additional $2.9 billion dollars, escalating the total cost of the debt borrowed from $5 to $7.9 billion dollars (Boone, 2016b). While Nalcor was negotiating the contract extension with Astaldi, and the increased federal loan guarantee, the construction of the dam in Labrador was temporarily halted in response to rising public concerns and protests across the province. These protests were sparked by new research on the project published by mercury scientists at Harvard University that showed that downstream communities, excluded from Nalcor’s initial research , would be subject to dangerously high levels of the neurotoxin methylmercury. To prevent this bio-accumulation, the report recommended that Nalcor clear the soil and vegetation from the dam reservoir. Nalcor, however, stood behind its original science, insisting no such danger existed and that, in any case, it couldn't afford the money or time it would require to clear the reservoir as recommended.



Through the Fall of 2016, demonstrations and protests intensified at the site in Labrador and across the province.





In mid-October, Premier Dwight Ball issued a halt to construction which lasted 11 days and ended in an emergency all-night meeting with representatives of affected groups. The meeting resulted in the creation of an Independent Expert Advisory Committee (IEAC) to make recommendations about what actions the government should take to ensure that no one was harmed by mercury poisoning. Meanwhile, Nalcor’s CEO complained that the shutdown was an unnecessary obstacle that was costing hundreds of millions in lost time and expense.



In May 2018, the IEAC committee released its report





which included recommendations similar to the Harvard study, namely that Nalcor remove soil from the reservoir, and cap wetlands in the surrounding area (APTN News, 2018). The costs of these measures was estimated to be about $714 million. To date, the provincial government has given no indication that it intends to follow the recommendations and that it is still looking into it. Plans remain on schedule to flood the reservoirs and no plans have been announced to clear vegetation.



The rough monetary equivalence of these unexpected $700M costs



- one to compensate a multinational construction company for delays in its construction operations, the other to prevent mercury poisoning in adjacent communities - provides a useful measure for understanding the ethical, economic and ‘biopolitical’ complexities of a mega project like this. Why were the delays and costs incurred by Astaldi ultimately recognized as legitimate expenses for which more federally guaranteed loan money could be found, while at the very same time, delays imposed by new scientific evidence of health risks were seen as irrational and unreasonable obstacles to completing what was now thought to be a dangerous engine of methyl mercury production? These questions show that Muskrat Falls has never been just a financial or engineering project. It involves important sociological, political and ethical questions about governmental responsibilities in recognizing the rights and needs of citizens vs. business clients when projects encounter unforeseen difficulties, as this one has. Perhaps these ethical equations have always been the premise of infrastructure financing, but they are much more visible when massive projects like this go wrong and clarify the social and political forces that make these equations possible.



References





APTN News. 2018, April 11. Committee releases report on methylmercury issues downstream from Muskrat Falls. APTN National News. http://aptnnews.ca/2018/04/11/committee-releases-report-on-methylmercury-issues-downstream-from-muskrat-falls/

Astaldi. 2018. Astaldi: Italian-made quality in infrastructure. Astaldi. Last updated: Jul 31 2018. http://www.astaldi.com/en/group/glance

Boone, M. 2016a, Dec. 21. Nalcor, Astaldi reach $1.83B contract to complete Muskrat Falls powerhouse. CBC. https://www.cbc.ca/news/canada/newfoundland-labrador/nalcor-astaldi-muskrat-falls-powerhouse-1.3906951

Boone, M. 2016b, Nov. 3. Ottawa approves additional $2.9B loan guarantee for Muskrat Falls. CBC. https://www.cbc.ca/news/canada/newfoundland-labrador/ottawa-approves-bigger-loan-guarantee-muskrat-falls-1.3835135

CBC News. 2013, Oct. 10. Italian company awarded $1B contract for Muskrat Falls. CBC. https://www.cbc.ca/news/canada/newfoundland-labrador/italian-company-awarded-1b-contract-for-muskrat-falls-1.1958421

CBC News. 2016, Aug. 4. Nalcor, Astaldi reach ‘bridge agreement’ for Muskrat Falls project. CBC. https://www.cbc.ca/news/canada/newfoundland-labrador/nalcor-astaldi-bridge-agreement-muskrat-falls-1.3707421

Cooke, R. 2016, Nov. 15. Astaldi discloses terms of bridge deal with Nalcor in quarterly report. CBC. https://www.cbc.ca/news/canada/newfoundland-labrador/astaldi-nalcor-bridge-deal-figures-1.3851728



Muskrat Falls Symposium



September 28 & 29, 2018
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