ST. JOHN'S, N.L. - The Harper government's high-profile promise to support a $6.2-billion hydroelectric project in Labrador won't be in Monday's federal budget, says a senior government source.
But the Conservatives moved Thursday to minimize any backlash, saying they would keep their promise of a loan guarantee or equivalent for Muskrat Falls.
"We made a commitment to support Lower Churchill in the platform," said the source who spoke on condition of anonymity. "But there is still work to be done, and it won't be in Monday's budget.
"It will get done. It's just not getting done Monday."
The Harper government wanted to counter claims by Liberal MP Gerry Byrne that any loan guarantee requires budgetary approval.
The source said a loan guarantee does not have to wait for the next federal budget and will be announced as soon as an agreement is reached.
"It will be provisioned for, accounted for, going forward. But it doesn't have to wait until the next budget to go into effect."
Byrne pounced on that explanation, accusing the Conservatives of misleading Newfoundland and Labrador voters during the recent federal election.
Tory campaign advertisements urged voters in the province to help Harper win a majority government to ensure support for the Muskrat Falls project. The implication was that MPs opposed to federal backing of the development -- particularly those from Quebec -- could defeat a minority government's efforts to extend fiscal help.
"They were the ones that said it needed parliamentary approval," Byrne said from Ottawa. "Now they're suggesting it's an order in council done by cabinet that can approve the Lower Churchill loan guarantee. So they're either lying now or they lied during the election campaign.
"The bottom line is, we were misled."
Byrne said he believes the government has no standing authority to offer such a loan guarantee without parliamentary approval.
"I've got a formal question presented today to the parliamentary budget officer to confirm or refute that understanding."
Premier Kathy Dunderdale wasn't available for comment Thursday, but has said she hopes the loan guarantee or equivalent will be in place by the end of the summer.
Milly Brown, the premier's press secretary, said in an email that it's not surprising the loan guarantee won't be in Monday's budget since Harper has said his government will be bringing forward its pre-election budget.
"We are, however, pleased with the progress of ongoing loan guarantee discussions, which are on track to conclude by the end of summer," she said.
Preliminary work on the hydroelectric megaproject is already underway.
The province has said Muskrat Falls will go ahead with or without federal help, but a loan guarantee could shave hundreds of millions of dollars off the total price tag.
Dunderdale staked major political capital on Harper's Muskrat Falls promise. She was ridiculed by opposition foes for joining him at a campaign rally in March in St. John's, N.L., when he made the election pledge. It was a big risk for the premier who will face provincial voters this fall.
Just one of seven federal seats in the province went Tory blue as Peter Penashue won a 79-vote squeaker of a victory in Labrador. He said his support for Muskrat Falls was the key factor in his long-shot triumph over Liberal incumbent Todd Russell.
Heavyweight Conservative contenders elsewhere in the province, including Fabian Manning -- who was swiftly reappointed to the Senate -- were soundly defeated. Tory organizers blamed a residual effect from the "Anything But Conservative" campaign waged by former premier Danny Williams in the 2008 election.
Williams launched the ABC attack in retaliation for what he said was Harper's broken promise to protect offshore oil royalties from equalization clawbacks. At the time, Williams and Dunderdale herself said Harper could not be trusted to keep his word.
Dunderdale defended her more recent support of Harper, saying his attitude toward the province has changed.
Byrne said the absence of Muskrat Falls in the budget should raise alarms, especially as the government has signalled it will include other campaign spending promises.
"If not in this budget, why not?" he asked, describing the matter as a simple line item.
"Something is not right."
