The recent re-election of Donald Trump and his subsequent punitive actions and threats towards Canada has spawned a rare moment of reflection amongst Canadians on how to best navigate, what has rightly been characterized as, an existential threat to our sovereignty. Not since the early days of the Canadian Confederation has the nation’s existence been threatened by an American president. Some suggest (less as time goes by) that Trump’s rhetoric and threats shouldn’t be taken too literally. They are, largely they say, words uttered in pursuit of some other game. They are a means to an end that we have not yet figured out, cannot see, they say.
History though gives us lots to worry about. And Trump’s history should give us no comfort. Threatening a nation’s sovereignty is not a joking matter and leaders who make such threats are always dangerous.
Amidst the scramble by Canadian politicians to plan an appropriate retaliatory action to the tariffs, and parallel to the diplomatic overtures to the Americans, there has been a rising discussion about the need for Canada, namely the provinces and territories, to eliminate inter-jurisdictional trade barriers within Canada. The elimination of trade barriers between provinces and territories would undoubtedly improve Canada’s competitiveness, allow for some relief to the inflation that will surely come by making products produced in one province more readily available to residents of another and in the case of energy, provide alternative transportation routes and thereby markets for Alberta oil and gas.
The Agreement on Internal Trade, an agreement that governs trade within Canada, is an agreement between the provinces and the territories and has no Federal participation beyond that of an observer. The feds can do little beyond talk persuasively. Not to diminish the ability of the federal government to talk persuasively and maybe even be impactful but the power to change the status quo lies solely within the purview of the provinces and territories. And while it would be in the longterm best interest of the country, as it was in the early days of Confederation, the elimination of barriers to interprovincial trade has proven to be extremely difficult.
From mid-2006 to late 2008 I was the Minister of Innovation, Trade and Rural Development in Newfoundland and Labrador. As such, I sat on and attended many meetings of the Committee on Internal Trade, the provincial and territorial body that oversaw the Agreement. For a period of time I was the chair of it. At the time, for much the same reason as today, Alberta was pursuing the addition of an Energy Chapter to the Agreement. They had a lot of support, including from the Government of Newfoundland and Labrador. Some of the eastern provinces saw the development of the Energy Chapter as a way of eliminating the protectionist elements of the Atlantic Accord, the federal-provincial agreement that governed the development of oil off the coast of Newfoundland and Labrador. The Accord, amongst other things, provided preferential treatment in hiring and contracting to individuals and companies based in Newfoundland and Labrador in the development and servicing of the offshore oil fields. It was an important agreement in helping Newfoundlanders and Labradorians secure employment and build the service industry that is so important to the economy of the province today. We were prepared to give up that protection in the constructing of the Energy Chapter. Why?
The free flow of energy, in all its forms, across the country was, and is, in the national interest and it was, and is, in the provincial interest of Newfoundland and Labrador. The critical part is that it has to be energy in all its forms. The argument of the Government of Newfoundland and Labrador at the time was pretty simple. You can put a boxcar load of coal on the rails anywhere in the country. You can put a tanker load of gas on the road anywhere in the country. You can put thousands of train tanks full of bitumen on the rails anywhere in the country. You can haul all of it wherever you want, across every provincial border, for the price of the ride. But, you cannot transmit electricity across a provincial border without the concurrence of the jurisdiction you are crossing. While the reasons are different, an electrical transmission line is treated the same way as an oil or gas pipeline and it is wrong in both instances. The free movement of massive amounts of energy, subject only to the cost of transportation applied to movement of similar forms of energy in the jurisdiction it moves through, is in the national interest. If that position could have been adopted in the Energy Chapter I believe we would have supported it. As it turns out, a deal could not be reached and it was in no small part because Quebec would not support the free wheeling of electricity across its jurisdiction.
In the intervening years the Government of Newfoundland and Labrador developed the Muskrat Falls hydroelectric site, built a power line down through Labrador, a subsea connection across the Strait of Belle Isle, transmission line down the west coast of Newfoundland, another subsea link across the Cabot Strait where it finally connected to the power grid in Nova Scotia. The development proved two things, amongst many others I suppose. Number 1, it is technically feasible to get hydroelectric power from Labrador to market without passing through Quebec. Number 2, it is extremely costly to do so.
The debate in Newfoundland and Labrador today, or at least prior to Donald Trump turning the world on its head, has largely focused on whether the current proposal for the development of Gull Island and the redevelopment/expansion of the Churchill Falls power plant is a good deal, as in could it have been better. In the midst of a debate which borders on acrimony, accusations of botching Muskrat Falls have been levelled and defended against; references to and bemoaning of the original Churchill Falls deal, that we will never get beyond I suppose, have been made; and accusations that any opinion can only be driven by political allegiances have been widespread. Joey haters and Danny haters and Furey haters have staked their ground. Unfortunate.
For the record I was gone from government by the time the Muskrat deal was done but I supported it. I still do. And I have no particular political axe to grind with anyone. My political axe is stuck in the chopping block. However, on the way to the point of my writing I will make these few observations about the Churchill River deals.
Where the Upper Churchill deal was a short term, during construction, benefit to Newfoundland and Labrador, in the long term it was a disaster. Fortunately, 2041 and the end of that contract is, finally, not that far off. The Muskrat development was too expensive and in the short term that is a big problem. However if anyone thinks Quebec would have come to the table willing to renegotiate the original Upper Churchill agreement 17 years before it expires and to develop Gull Island had it not been for the development of Muskrat and the Maritime Link, they are likely wrong.
The feasibility of the Maritime route (costly though it is) coupled with a growing demand for hydrogen in Europe likely caused Quebec to look for a deal before other suitors came calling. Newfoundland and Labrador wind and hydro for hydrogen production has been on the radar of Europeans since they began to aggressively pursue alternatives to conventional hydrocarbon based fuels. Churchill River hydro coupled with Labrador Plateau wind is a resource that is not easily competed with if developed and possibly marketed in tandem. The hydrogen production potential of that electricity on tidewater at Happy Valley-Goose Bay would be extremely attractive to European heavy industry looking for alternatives to Russian oil and gas. It might also be a lucrative business attraction tool for the exploding AI industry. The development of AI requires massive, preferably cheap, electricity to power the burgeoning computer systems that create and run it. But again I digress.
The recent announcement of the Gull/Churchill Falls deal raises numerous questions. I will touch on one. The fact that the rate for Churchill Falls power, largely from an installation built and paid for in the 1960/70’s, will be ~half the rate of Gull Island power, a completely new development, seems inexplicable to me. If there was a price differential one would think a higher return would come from Churchill Falls and a lower rate from Gull. In any event, negotiations with Quebec should have started with replacement costs for the existing power at Churchill Falls (at least 16 cents/kwh according to Hydro Quebec) and conclude with a rate that is much higher than the MOU net to NL rate of 3.9 cents.
For the sake of the argument let’s just say that all three deals could have been better and leave it at that. Why?…in a moment. Let’s also say that in the long term they will all pay significant dividends to Newfoundlanders and Labradorians well beyond the point when we are distant memories (Deer Lake Power generating station commissioned in 1925 and still running). Let’s also admit that neither of the deals provide the best return on the water because they don’t. Quebec’s prohibition on the free-wheeling of power from all three effectively ensures a reduced market return to Newfoundland and Labrador. Like Alberta bitumen, Newfoundland and Labrador electricity does not have access to an open and competitive marketplace. That is the issue. And it needs to be fixed.
We have accepted, (large portions of the population and the political machinery of this country at least) that Alberta bitumen is being sold into the USA at a discounted rate because, as a country, we have not facilitated the development of the pipeline infrastructure to move it to tide water on one or another of our coasts. We have accepted that enabling the movement of Alberta bitumen to tide water will increase the return from the market simply by opening it up to purchase by others, including the Americans. We have accepted that this is in the national interest, (unless of course you are completely opposed to further hydrocarbon development). Then by extension we must accept that Churchill River hydroelectricity has not been, is not now, and will not ever, be developed such that it will be sold at anything but at either a discounted rate or through needlessly (needless because the best and cheapest route is through Quebec) costly meandering transmission lines to get around Quebec. Either way the return to Newfoundland and Labrador is substantially reduced until such time as Quebec out of self interest or otherwise has no choice but to end the restriction.
The impediment, constructed by Quebec, to Churchill River hydro development has resulted in Muskrat and Gull being delayed for over 40 years. It has resulted in Muskrat power being developed for $0.07/kwh at the power plant but $0.22/kwh (according to Stan Marshall in the Muskrat inquiry) at the end of the needlessly long and costly transmission circuit of the Maritime Link. It will stymie any attempt to develop the massive 10,000 megawatt wind potential of the Labrador Plateau and it will prevent on land and at sea wind potential from being developed across the remainder of the province save some smaller development for hydrogen on, ice free, tide water for export to Europe. Against this backdrop I would ask why the Government of Newfoundland and Labrador would ever entertain an expansion of contractual agreements with Quebec over hydro electricity. I would suggest that in the present environment a better approach would be to partner with European interests to develop Gull Island and the wind of the Labrador Plateau, build a massive hydrogen electrolyser on Lake Melville and export to Europe. The need for costly transmission lines is eliminated and value-added energy production on Lake Melville provides additional benefit to NL rather than at the western end of a transmission line. By 2041, when the Upper Churchill contract expires, Quebec and Canada might find a way to eliminate the restriction on the free wheeling of electricity and NL would have a fair opportunity to negotiate a new, fair contract, maybe even with Quebec! If not there’s still Europe. Or AI.
So yes, fix the restrictions on the colour of margarine (because who wants margarine that doesn’t look like butter), the movement of beer (because there aren’t enough ways to get drunk across the country), and whatever other stupid impediments there are that prevent the free flow of goods between and across provinces but, while we are at it, focus on and fix the big impediments to developments that are truly in the national interest. If the free movement of Alberta oil is one of those national interest issues then surely the unobstructed movement of electricity, not just from Newfoundland and Labrador, is as well. If we won’t do that, then lets stop fooling ourselves into thinking that any political leader in NL can get the best deal for hydroelectric power because they will always be left with two options; they can go cap in hand, as Smallwood and Furey have, to Quebec or; they can build an expensive transmission line to get around Quebec through the Maritime route as Williams did. Either way the competitive pricing of NL electricity is thwarted and with that so is the country compromised. In the present restricted access environment you might get a good deal, you might get a raw deal but odds are you won’t get a fair deal.
Editor’s Note: Trevor Taylor was the Progressive Conservative MHA for The Strait’s-White Bay North from 2001-2009. He held a number of cabinet portfolios including Minister of Fisheries and Aquaculture; Minister of Transportation and Works; and Minister of Innovation, Trade and Rural Development. Since leaving politics he has worked in Arctic marine conservation and on initiatives related to alternative energy in marine applications.
He now lives in Iqaluit, Nunavut.