Breaking ground

Breaking ground

Stability and possibility are recurring themes in the Dunderdale administration.

Though the province is currently in an enviable fiscal position—having reduced its net debt from a peak of almost $12 billion to $7.8 billion at the beginning of 2012—that newfound prosperity is very much dependent on the vagaries of international energy markets. In 2011-12, higher-than-expected royalties from the province’s lucrative offshore oil projects resulted in a $776.5-million surplus. By the middle of 2012, however, the government was projecting an annual deficit of $258.4 million. Fast forward six months to December and government officials were warning that the current year deficit could climb as high as $700 million—all due to the f luctuating price of crude. For every dollar that the price per barrel drops below $124, the provincial treasury takes a hit of almost $20 million.

According to Dunderdale, the provincial government was facing bankruptcy when her party came to power. With over 75 per cent of the budget eaten up by debt servicing, education and health care, that left only 23 cents from every dollar to do everything else that needed to be done in the province. “We did an assessment when we came into this place,” she says. “We thought, what’s the future going to be? Where are our strengths? What is it that we can rely on?”

The fishery, traditional pillar of the provincial economy, wasn’t showing much promise. Forestry, too, was in decline, not just in Newfoundland but all over the world. And though the province is blessed with abundant non-renewable resources such as the aforementioned oil and gas as well as abundant mineral deposits, those resources have a finite life span. Like her parents before her, Kathy Dunderdale was more interested in something that offered long-term income stability.

Enter Muskrat Falls.

It’s hard to imagine in its natural state, but this picturesque 15-metre waterfall on the Churchill River in Labrador has the potential to generate 824 megawatts of hydroelectricity that could be used to meet the province’s projected demand forecasts—with more than enough left over to power future industrial development. Add in a 180 kilometre subsea Maritime Transmission Link between the island of Newfoundland and the province of Nova Scotia (purchased from Emera in exchange for 20 per cent of the project’s power), and the province has a way to finally, figuratively and literally, break through the Quebec wall to export markets. The Emera link could see Muskrat Falls power make its way through Nova Scotia and New Brunswick and on into the northeastern United States.

It has to be said: in a province whose citizens grow up steeped in bitterness over the short-sighted deal they signed with Hydro Quebec for development of the Upper Churchill, this opportunity to thumb their noses at their Gallic cousins is irresistible.

Yet, for all its attractive attributes, development of Muskrat Falls is not without controversy. With a $7.4 billion (potentially growing) price tag, it is prohibitively expensive. What if costs go higher? What if Newfoundland and Labrador proceeds, but Nova Scotia pulls out? What if power rates double? What if it bankrupts the province?

Asked how the province can afford to pay for the development, given its ongoing deficit and her own comments about needing to control the debt, Dunderdale notes there are two kinds of debt. “If you’re building a home or you’re building Muskrat Falls, that enables development. That enables business. At the end of the day, that will pay for itself and feed the treasury. If we were borrowing money to buy groceries or pay for operational expenses, as important as that is, that wouldn’t be a sensible thing to do.”

Given that her predecessor is credited with landing the deal just before his unexpected retirement from politics, you have to wonder if Dunderdale isn’t sometimes resentful of him getting the credit. “I’m always puzzled when someone asks me that. It’s not about me,” she says when you put the question to her. “It’s about the place.

“I know whence I come. And the great struggle it’s been for most people in this province. I identify with ordinary Newfoundlanders and Labradorians who have struggled, whose families have struggled for 500 years, to get a good foothold in this place, and to have some comfort and dignity, quality of life. I just see myself as the facilitator of all that.”

Though she’s only a year into her current mandate, Kathy Dunderdale says she “definitely” plans to lead her party in the next general election.

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Dawn Chafe
About Dawn Chafe

For the past 19 years, Dawn has been editor of Atlantic Canada’s most award-winning and largest circulation business magazine: Atlantic Business Magazine. Under her editorial direction, Atlantic Business Magazine has won 14 Atlantic Journalism Awards, three TABBIE international business press awards and two KRW national business press awards.

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