Guest Post by Ron Penney
MISSED OPPORTUNITY: THE SCUTTLING OF THE 2002 FRAMEWORK AGREEMENT FOR DEVELOPMENT OF GULL ISLAND
full development of the Lower Churchill consists of two projects: Gull Island
and the much smaller Muskrat Falls project. Gull Island is projected to be a
2250 megawatt project as compared to the Muskrat Fall’s 824 megawatts. Gull
Island was always felt to be the far more economic project.
2002 a draft Framework Agreement was negotiated with Hydro Quebec to develop
Gull Island. A link to that agreement is found here.
the time, the then Chair of Newfoundland and Labrador, Dean MacDonald, and
another Board member, Mark Dobbin, broke with the rest of the Board, and
opposed the agreement. The then Leader of the Opposition, Danny Williams, became
aware of the agreement and mounted a vigorous and ultimately successful
campaign to scuttle the agreement.
represented the most recent attempt to develop Gull Island and led directly to
the Muskrat Falls debacle.
|Canadian Press Photo
Mr. Williams became Premier any suggestion of dealing with Quebec was anathema
and our energy policy became one based on revenge for the inequities of the
Upper Churchill project and the obstacles placed in our way by Quebec to
restrict access to export markets. This led to the renewal of what former
Premier Joey Smallwood called the “Anglo Saxon Route”, which is the real
motivation behind the Muskrat Falls. Plus, of course, former Premier Williams
need for a legacy project to allow him to retire from active politics with the
acclaim of an adoring populace.
know how that is turned out. Revenge doesn’t make for good public policy
particularly when it backfires so spectacularly. Would Mr. Williams still put
his own money into Muskrat Falls, as he famously said he would if he could,
when he announced the project?
what did the 2002 Framework Agreement contain and how does it look now, some 16
years later, as compared to the Muskrat Falls project, which may spell the end,
yet again, of our right to govern ourselves.
project would have been constructed by us through a company called the Gull
Island Energy Corporation.
would have been financed by Hydro Quebec.
project was primarily an export project with recall rights.
price was $35.50 per megawatt hour, or 3.55 cents per kilowatt hour, indexed to
changes to what Hydro Quebec was getting in the market.
would have had the right to recall up to 500 megawatts of power during the life
of the power purchase agreement, which compares favorably to what we we are
projected to use from the 40% of Muskrat Falls Power, 330 megawatts. Assuming
an in service date of Gull Island of 2010, we would have had access to 300
megawatts of power in 2021, at a third of the cost of Muskrat Falls power and
could have sized the transmission line accordingly.
of the key positive aspects of the agreement would have been the right of Hydro
Quebec to appoint an Independent Engineer, similar to what the Government of
Canada has done. The difference being that Hydro Quebec actually has a record
of building Hydro projects on time and on budget.
was also a requirement to hire an experienced Engineering, Procurement, and
Contracting Company to manage the project. We, of course, relied on our “world
class experts” to run the project. How has that worked out so far?
there would have been a water management agreement binding on Hydro Quebec,
something which we don’t have now.
project would have also been built at a time when we had competent management
at Newfoundland and Labrador Hydro and when there were no major construction
projects competing with it. It would have been far more likely to have been
built on time and on budget.
pretty good now, wouldn’t you say?