Churchill Falls: fact, fiction and foolishness
Dear Editor:
The 1969 Churchill Falls Agreement expires in 2041. The Churchill Falls Labrador Corporation (CFLco) owns the generating plant in Churchill Falls and it is jointly owned by NL Hydro who owns 65.8 percent of the project, and Hydro Quebec who owns the other 34.2 per cent. Under the agreement, Hydro Quebec gets to buy up to 29,750,000 MWh (85 per cent) of the power generated for 3 mills (tenths) of a cent for the first five years declining to 2.5 mills per KWH for the last 15 years. NL Hydro also gets to buy 5.5 per cent of the power for the same rate. The Churchill Falls Corporation distributes its profits to NL Hydro and Hydro Quebec minus operating and capital costs. The project generates 35,000,000 MWh annually.
Hydro Quebec power is transmitted to its markets both inside and outside Quebec using its own transmission lines. Quebec has over 60 hydroelectric generating stations including the James Bay Project which produces 40 per cent of its power needs. Bio energy and solar power provide a small portion. Wind power makes up 5 per cent of its needs and the balance from Churchill Falls makes up about 15 per cent of its energy consumption. Quebec consumes up to 200 million MWh annually and it exports 13-22 million MWh annually.
In 2041, the agreement with Hydro Quebec will expire and NL Hydro will seek to increase the rate from .02 cents KWh to substantially more. What that amount will be is not known but regardless of the rate, the only way to get the power to Quebec and beyond is by using Hydro Quebec transmission lines. Half the power from Churchill Falls is exported but Hydro Quebec is constantly upgrading its wind power generation so its reliance on Churchill Falls power in 2041 is questionable.
In 2041 when the current contract expires, the ownership of the generating plant at Churchill Falls will not change. NL will continue to own 65.8 per cent, and Quebec will continue to own 34.2 per cent. CFLco owns the facility and both Quebec and NL pay for the power they use. They have that money returned to them in the form of dividends at the ownership percentage less capital and operating costs.
Quebec sells Churchill Falls power for approximately 10.3 cents KWH. It pays CFLco approximately $74 million dollars annually for power that it sells for approximately $3 billion dollars annually.
NL pays $500,000 to CFLco for its power portion and sells it to customers in Labrador for 3.154 cents per KWH for $60 million. (The rate on the island portion of the province is 15.587 cents per KWH for power generated on the island).
In 2024 the Liberal government negotiated an MOU with Quebec and in a subsequent election it lost power and the Conservative government negotiated a new MOU.
Prior to the election, the Liberals were jubilant. Premier Andrew Furey echoed the comments of former Premier Brian Peckford’s 1982 speech that “Someday the sun will shine and have-not will be no more.”
Liberals were dancing in the halls and Conservatives, NDP and Independents didn’t have dance partners and their collective sentiments were that the deal was as bad as the 1969 deal or possibly worse.
Then came a change of government, the Conservatives won, they negotiated a new MOU and suddenly they were dancing in the halls and the Liberals, NDP and all of the Independents except Eddie Joyce couldn’t even hear the music.
Politics at its worst from all except Joyce who was crucified on social media for supporting the new MOU. No person should ever have to experience the insults, lies and the unfounded accusations that he was subjected to by persons I can only describe as ‘Trumpians.’
Let’s have a quick look at a few of the differences between the 2024 Liberal deal and the 2026 Conservative deal.
Both MOU’s are energy agreements between the two provinces to replace the 1969 contract and co-develop new hydroelectric generation on the Churchill River and the Gull Island project. The new MOU represents upgrades to produce a new 1,100 MW powerhouse and 550 MW upgrade.
The Gull Island project will add 2750 MW and will be 60 per cent owned by NL and 40 per cent by Quebec, somewhat similar to the 1969 ownership breakdown. Hydro Quebec will be the project manager. There will also be a wind generation project 40 per cent owned by the federal government generating 2000 MW.
Quebec will provide $3.5 billion to NL to cover NL’s equity share of its 60 per cent ownership. The federal government will also provide $3.5 billion ($1 billion for the wind project, $1 billion for transmission lines, and $1.5 billion for construction).
The total cost of the project is $70 billion. Quebec bears full responsibility for the construction costs and overruns.
2024 2026
Value to NL $36 Billion $49 Billion
Nominal Value $225 Billion $273 Billion
Cash flow – $0 $10 Billion
Retained Power 1990 MWH 2350 MWH
No transmission guarantee 985 MW transmitted through PQ at their rates
5.9 cents per kwh 1.8 -11.5 cents per kw in 2041
Federal involvement – $0 $10 Billion and loan guarantee
Gull Island 2,250 MW Gull Island 2,750 MW including 400 for NL
Jobs guarantee? Nothing 85 per cent of all person hours for local people
Nothing 2,000 MW Wind project
Debt balloon payment ($30 billion) $5 Billion
Duration 50 years Duration 50 years
One of the objections from the Liberals et al is the lack of indigenous support in the 2026 MOU. It cut their financial benefits by over 50 per cent. It is a complicated issue made more difficult by the lack of recognition of Innu heritage and the involvement of the Quebec indigenous group.
But is that enough to oppose the MOU?
The other objection is the amount Quebec will pay for power. The 2024 deal set the rate at 5.9 cents KWH and the 2026 deal starts it at 1.8 to 7.4 on a sliding scale not delineated. That’s a value concern but can be addressed.
But does the increased power being made available to NL, and the ability to sell that power through PQ transmission lines and the involvement of the federal government, balance or even create more benefits to NL?
Most of the objections to the 2026 MOU from the general public stem from the promise Premier Wakeham made during his election campaign to hold a referendum on the MOU. Of all the promises I have heard premiers make, this one was the craziest and only common sense made him decide not to hold a referendum.
In my opinion, the percentage of eligible voters who could vote in such a referendum with any degree of knowledge of the agreement is less than 1 per cent.
I attended a rally at Confederation Building opposing the MOU, to gauge the knowledge of people rallying to oppose it.
I recorded some of their comments:
“Because we are giving Quebec our resources the same as the ‘69 deal.”
“We should wait ‘til 2041 and then we will have Quebec by the balls.”
“The f—ng PCs are being paid by Quebec to give away our power.”
“None of these assholes know what they are doing. They got elected in a fluke and now they are f—n’ us.”
It is unfortunate that we live in this so-called democracy where the Opposition opposes for the sake of opposing. The Conservatives did it with the 2024 MOU and the Liberals are doing it with the 2026 MOU. The NDP just oppose, and at a recent visit by their federal leader, Avi Lewis, he applauded them “for being the only adults in the room.” I doubt very much if that man has even read the cover page of either MOU. I am at a loss to understand why reporters let him make that statement without being challenged.
The Liberals have valid concerns but if they had the interest of the people of the province as their prime directive, they would raise those concerns by addressing them directly and asking the Conservatives to explain their rationale for that pricing change in particular. Did they agree to it to get the extra power, the transmission capability and the elimination of the Debt Balloon, saving the province $25 billion? I think that that makes up for the pricing difference.
I support this MOU. I supported the 2024 MOU. I think the 2026 MOU improves upon the latter and will net the province billions of dollars as well as 23,000 jobs during the construction phase alone.
Those ignoramuses who object to this agreement saying it is rushed only cements my belief that they truly do not have even a limited understanding of this MOU. Votes were made strictly on party lines and that is unforgiveable. Even MHA Keith Russell left the Conservative Party as proof that our MHAs adhere religiously to the Prime Director of Premier Smallwood: “The primary mission of an MHA is to get re-elected.”
Tom Badcock,
St. John’s