The expiration of the Churchill Falls contracts in 2041 is an opportunity for Quebec and Newfoundland and Labrador to fundamentally change their relationship and enter into a pact that will truly benefit both parties.
To achieve this, however, Quebec will clearly have to give up obtaining another ridiculous tariff, on the one hand, and Newfoundlanders will have to put aside their vengeful animosity, on the other hand.
All Churchill Falls power contracts expire August 31, 2041. This includes the infamous 1969 power contract with Hydro-Quebec, part of which allows NALCOR to purchase power, as well as contracts for supply electricity to Labrador.
As noted by Francis Vailles, the government of Newfoundland and Labrador and the government of Quebec are preparing to discuss what will happen from September 2041. They are the only shareholders of the two crown corporations – NALCOR and Hydro-Quebec – who respectively own 65% and 35% of the company that operates the Churchill Falls power station and transmission lines.
In Quebec as in St. John’s, inertia is the plan for the future. The new majority government of François Legault wants to use cheap electricity to subsidize industrial development. The only difference is that the subsidies that used to go to aluminum smelters will now go to battery factories.
In Newfoundland and Labrador, Andrew Furey appointed not one, but two committees to help him develop the energy potential of the Churchill River. Don’t be fooled. Furey uses the committees as props. What he does is invariably less impressive than the hype. He appointed a committee for economic development, another for health care reform, and ignored both. Similarly, one of Churchill’s committees is obviously for show. The other is just a team of managers. Therefore, the government still does not know what to do.
NALCOR’s management team is important only because it was chaired by Furey’s closest friend, Brendan Paddick. Paddick remains one of the few, aside from Furey’s father, who can whisper in Furey’s ear. Paddick has been Furey’s right-hand man on two dodgy energy projects so far. Funding for Muskrat Falls will collapse, because it’s basically Danny Williams’ old unworkable plan. The Stephenville hydrogen megaproject will need provincial government money to get started, and even more to survive. It is money that the province does not have.
Seen from Quebec, Furey might look like the easy target that Emera (Nova Scotia Power Corporation) saw in Danny Williams. He may be. But trying to make another deal to get low-cost electricity from Churchill Falls, even adding the lower Churchill River to it, serves no one’s interests.
Quebec may have gotten electricity at an absurd price in 1969, but the cost has been 50 years – so far – of poisoned relations between the two provinces, decades of unnecessary lawsuits and a dysfunctional business. at Churchill Falls which today wastes tens of millions of dollars of water rather than producing electricity.
The only real winners were the Montreal lawyers.
The expiration of the 1969 contract is the occasion for a significant change. Treat the Churchill Falls (Labrador) Corporation (CF(L)Co) as a joint project of the two energy Crown corporations, separate from any other project. The two shareholders could ask NALCOR and Hydro-Quebec to make as much money as possible through CF(L)Co.
CF(L)Co would take over the Muskrat Falls Generating Station and develop any other projects along the river on a sound commercial basis. This would solve Muskrat Falls’ financial problem, but without the risk that Hydro-Quebec would remain the villain in Newfoundland’s revenge fantasies.
Hydro-Quebec would pay market rates for a large, guaranteed supply of electricity that would be cheaper than the new options. Newfoundland and Labrador would benefit from the same agreement as Quebec on tariffs and supply. The company could sell any excess to the United States, the Maritimes or Ontario. As shareholders, Newfoundland and Labrador and Quebec would benefit equally from the profits, but remember that they would also benefit from a de facto discount on their own purchases.
The approach suggested here would resolve long-standing political issues and ensure that both provinces meet known and likely national electricity needs at a reasonable cost. This fact alone provides a solid basis for the economic development of each province separately.
More importantly, there is great potential for future cooperation between Quebec and Newfoundland and Labrador for the social and economic development of the Labrador Peninsula. The two provinces have wasted 50 years fighting instead of working together productively. Quebec and St. John’s could focus their next discussions on CF(L)Co and leave the speculative industrial possibilities of battery plants and mines for further negotiations. A successful deal on a new CF(L)Co could mark the beginning of real change, but nothing is possible if old animosities are renewed with another contract based on old faulty assumptions.
