Newfoundland and Labrador will split province-owned Nalcor Energy Corp. into separate companies to keep its profitable oil and gas business separate from the debt-laden Muskrat Falls hydroelectric project.
Canada's easternmost province will invest C$723.9 million in the C$12.7 billion Muskrat Falls project located on the Churchill River in Labrador, Finance Minister Tom Osborne told lawmakers in the fiscal 2018-2019 budget speech. The project is close to 90% complete, he said. The province will spend more than C$34 million in 2018 and 2019 for an independent inquiry into the skyrocketing cost of Muskrat Falls, which was sanctioned by a previous government with an anticipated cost of C$6.2 billion.
"While we cannot change the past, we can learn from the mistakes and make more responsible, informed decisions that minimize the impact on ratepayers," Osborne said. "Addressing electricity rates has been, and will continue, to be a priority for our government."
A new company will be formed to take on Nalcor's profitable oil and natural gas business, which manages the province's share of offshore production in its waters. In addition to existing production from projects like Hibernia and White Rose, companies including Husky Energy Inc., Exxon Mobil Corp., China National Offshore Oil Corp. (CNOOC), Statoil ASA and BP PLC have committed C$2.9 billion to exploration of new basins off the province's shore.
"Our government is committed to initiating a process that would see the oil and gas subsidiary of Nalcor Energy established as a standalone Crown corporation," Osborne said. "It would work directly with the Department of Natural Resources to accelerate the growth and opportunity of our petroleum industry, returning significant value to the people and economy of Newfoundland and Labrador."
The government is also developing a so-called carbon tax on emissions. Canada's provinces must institute their own emissions-reduction programs or face a C$50 per tonne tax imposed by the federal government. Osborne said the province is working with the federal government on details of the tax which will be revealed to the public this spring.
The province forecasts a budget deficit of C$800 million in the current year. It anticipates a budget surplus by the 2022-2023 fiscal year.