Commission of Inquiry Respecting the Muskrat Falls Project
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COMMISSION OF INQUIRY RESPECTING THE MUSKRAT FALLS PROJECT Transcript | Phase 1 Volume 49 Commissioner: Honourable Justice Richard LeBlanc Thursday 29 November 2018 November 29, 2018 No. 49 CLERK (Mulrooney): All rise. MR. PEDDIGREW: Yes. This Commission of Inquiry is now open. Dwanda Newman? The Hon. Justice Richard LeBlanc, presiding as MR. BENNETT: Dwanda Newman. Commissioner. MR. PEDDIGREW: Jim Oxford? Please be seated. MR. BENNETT: Jim Oxford. THE COMMISSIONER: Right. Mr. Peddigrew. MR. PEDDIGREW: And Darlene Whalen? Sir, you remain under oath at this time. MR. BENNETT: And Darlene Whalen, yes. MR. BENNETT: Understood. MR. PEDDIGREW: Okay. And that would be the same panel as for the Water Management MR. PEDDIGREW: Thank you, Agreement decision, as well. Is that your Commissioner. Good morning, Mr. Bennett. understanding? MR. BENNETT: Good morning. MR. BENNETT: I – it’s a long-time back, but it’s easy to find out who rendered the decision. MR. PEDDIGREW: First question I have for you this morning is in relation to the PUB MR. PEDDIGREW: Okay. reference decision from March 2012. Be fair to say that Nalcor did not agree with the finding or MR. BENNETT: I know they all sat on the did not – I guess, was not fond of the finding by board. the PUB, that it was unable to make a decision. MR. PEDDIGREW: Okay. Yesterday when I MR. BENNETT: I think that, yeah, we were – was asking you some questions about the we could have expected, or were looking for financing and, I guess, the possibility of more than the decision that was reached, yes. financing without the federal loan guarantee and I think you indicated that you did have financing MR. PEDDIGREW: Right. So in Nalcor’s arranged – view, the Interconnected Option was the least- cost option and the PUB indicated it could not MR. BENNETT: No. reach that conclusion, you disagreed with that conclusion. Would that be fair? MR. PEDDIGREW: – if there was no federal loan? Or – MR. BENNETT: We reached our own – we reached a conclusion that we had, you know, MR. BENNETT: No. from Nalcor’s perspective, provided the supporting documentation to – MR. PEDDIGREW: – there was an agreement on financing? MR. PEDDIGREW: It was different than the PUB’s? MR. BENNETT: No, I didn’t say that. MR. BENNETT: Yes, I agree with that. MR. PEDDIGREW: Okay, if you could you explain then what you did say? MR. PEDDIGREW: Okay. You aware who the panel on the PUB was – who made that decision MR. BENNETT: I think I said that we – that – the four individuals? the project and the financing terms had been presented to rating agencies. MR. BENNETT: Off the top of my head, Mr. Wells was the chair – MR. PEDDIGREW: Had been presented? Commission of Inquiry Respecting the Muskrat Falls Project 1 November 29, 2018 No. 49 MR. BENNETT: Yes. MR. PEDDIGREW: Right. I guess the terms and the amount had not been – MR. PEDDIGREW: Okay, but no – MR. BENNETT: No. MR. BENNETT: I understand that they – a response had been provided, that the project MR. PEDDIGREW: – determined. would be financeable from those same rating agencies. MR. BENNETT: No, not at all. MR. PEDDIGREW: Right. Financeable? MR. PEDDIGREW: Mr. Bennett, just following up on some questions about the MR. BENNETT: Yes. I didn’t say the financing natural gas option and some of Ms. O’Brien’s was arranged. questions for you. MR. PEDDIGREW: Okay. Sorry, I didn’t I think you said that the decision to screen out mean to suggest that it was arranged. Sorry if natural gas was a decision that was made by that was the word I used. But financeable – what yourself and Mr. Martin. Is that correct? – to who – to what amount? Was that discussed? MR. BENNETT: I don’t think that – I think MR. BENNETT: I wasn’t deep into the details. maybe Mr. Keating may have said that at one Mr. Sturge looked after the presentation to the point in time – but certainly we looked at, you rating agencies and the – my understanding of know, we looked at natural gas. It was, you the situation was that the rating agencies had know – the thinking in terms of the merits of indicated that the project, in their view, could be natural gas are documented in our PUB financed. submission. I was generally responsible for the work that went to the PUB and, you know – MR. PEDDIGREW: But financed to what from broad terms, you look at natural gas, if degree? I mean, are we talking that they were you’re thinking of natural gas – domestic natural willing to lend 2 billion, 10 billion? gas. MR. BENNETT: I don’t have the details on the MR. PEDDIGREW: Yes. terms and conditions of those ratings. I wasn’t directly involved in those. MR. BENNETT: Yeah, I was – I’d certainly discussed that conclusion, understood what the MR. PEDDIGREW: So financeable depending puts and takes were, and supported not – not on how much. taking natural gas beyond that initial screening. MR. BENNETT: That the project could be MR. PEDDIGREW: Right. So not taking it to financed. That’s the level of information that I Decision Gate 2 analysis. have. MR. BENNETT: Absolutely. MR. PEDDIGREW: That it could be financed. But you don’t know how much they were MR. PEDDIGREW: Okay. willing to finance. Ms. O’Brien asked you some questions and MR. BENNETT: They were – they weren’t indicated that during Mr. Keating’s evidence lenders, right? They’re the rating agencies who that Mr. Keating felt – or was of the view that were looking at the project and trying to, you natural gas might be less costly than the Isolated know, provide their view on the extent to which Island Option. it could be financed or what those, you know, what the – I guess in general terms – the quality Do you recall those questions? of that financing would look like. MR. BENNETT: Those questions to Mr. Keating? Commission of Inquiry Respecting the Muskrat Falls Project 2 November 29, 2018 No. 49 MR. PEDDIGREW: Well, the questions from I mean, there’s uncertainty in the price of what Ms. O’Brien to you about Mr. Keating saying oil is going to be, would you agree with that? that the option of natural gas may be less costly than the Isolated Island Option. MR. BENNETT: That’s why we were using forecasts. MR. BENNETT: If I recall, that was information from the WoodMac study and I MR. PEDDIGREW: Right. guess we’re looking more at – just to be clear – liquefied natural gas or LNG – There would be forecasts available, I’m assuming, for natural gas as well? MR. PEDDIGREW: Yes. MR. BENNETT: It’s a little less clear for MR. BENNETT: – as opposed to – natural gas. MR. PEDDIGREW: LNG, yes. MR. PEDDIGREW: Right. MR. BENNETT: – right. There’s uncertainty in all – MR. PEDDIGREW: Okay. MR. BENNETT: I – MR. BENNETT: And the point that was being MR. PEDDIGREW: – oil, price of natural gas made there, and as I understood it, was that – all these things have a degree of uncertainty. WoodMac had looked at some cost considerations and made some assumptions as to MR. BENNETT: I think the view with oil and – about what the cost of gas could be. We didn’t refined oil products is that the market is quite have necessarily price information, as I liquid – and I don’t mean that in terms of the understand it. product, I mean in terms of how the market works. That it’s easy to look at a given fuel MR. PEDDIGREW: Okay. I mean, I believe alternative and source it from multiple locations one of the answers you gave yesterday was that and basically the difference is the difference in you did not know the price of LNG – shipping. So I would say at a high level, there’s less market power involved in a supplier for MR. BENNETT: That’s right, we – refined petroleum products than for LNG. MR. PEDDIGREW: – right? MR. PEDDIGREW: Right. MR. BENNETT: – we were of the view that That’s where your – those were your initial we’re not a large-scale LNG customer. The view assessments. It wasn’t done as part of a detailed – and I think that the Ziff study had commentary analysis like it was done with the Isolated Island on this as well – that the price that we would be Option? achieving would be very similar to the Isolated Island case and our supply of distillate fuel; that MR. BENNETT: That’s right; we didn’t run it a seller to us would be looking at gas pricing, to – you know, priced against our alternative fuel source. MR. PEDDIGREW: Right. MR. PEDDIGREW: There’s some uncertainty MR. BENNETT: – we didn’t run it to DG2. in the price of LNG. MR. PEDDIGREW: If I could take you to MR. BENNETT: I’d agree with that. Exhibit P-01204, please. MR. PEDDIGREW: Right okay. THE COMMISSIONER: On the screen. Commission of Inquiry Respecting the Muskrat Falls Project 3 November 29, 2018 No. 49 MR. PEDDIGREW: And if we could scroll MR. PEDDIGREW: Okay. Then does that down a little bit there, Madam Clerk? make it more interesting to make that comparison then between the 10.8 when it gets So I believe this is an exhibit that was put to you down to the low 10s? by Ms. O’Brien, and if we look at the second and the third columns here we see Isolated MR. BENNETT: I think you still should be Island at 10.8 billion; and then the LNG column comparing to the 8.4.