Amid current economic uncertainty, it is reassuring to see the newly elected NL government exercising caution regarding a new deal for the future development of the Churchill River. The expectation is the Independent Panel will be thorough, and the Wakeham Government will not add to the inequity that has characterized the existing Churchill Falls contract since 1969.
But first some Background
Not to long ago, with encouragement from the federal government, the province supported a project to convert wind-generated electricity into hydrogen or ammonia, intended for export as clean energy. Despite considerable enthusiasm, there appeared to be a lack of thorough economic analysis supporting this concept. The government proceeded at full speed, but within months, the initiative collapsed, leaving the province and business partners facing significant losses. Thankfully, the province’s exposure was limited enough to avoid lasting damage, and there is hope that this situation remains contained.
The Muskrat Falls project serves as a stark reminder of the risks inherent in large-scale development. It ran billions over budget and was completed years behind schedule, resulting in severe consequences for electricity ratepayers and the provincial economy. The solution to this costly mistake was to add billions to the debt and extend repayment, meaning future generations will bear the financial burden for decades. Although Newfoundland and Labrador Hydro (NLH) is the entity through which these payments are managed, ultimately, it is the people who pay.
The Churchill Falls 1.0 agreement is notorious for its inequitable outcomes. With fifteen years remaining on the deal, Quebec continues to receive billions in windfall revenues while Newfoundland and Labrador’s own returns barely cover costs. The 1969 contract failed to address the sharing of extra revenue from energy market price increases, and the highest court has ruled that only Quebec benefits from these gains. This outcome is widely seen as unjust.
Churchill Falls 2.0 (CF2.0): Promise and Caution
The memorandum of understanding for Churchill Falls 2.0 is presented as a solution to the challenges of CF1.0, promising significant financial and infrastructure benefits. This complex, multi-project proposal would commit Churchill River assets for another fifty years. Due to the gravity of the deal, the new provincial government has wisely ordered a comprehensive review. By the end of April, the results of this review should provide clarity and hopefully chart a viable path forward.
Given the immense stakes involved, it is critical that any new agreement delivers a fair outcome for the province. A just solution requires Newfoundland and Labrador share in future energy market price fluctuations, and to include explicit clauses for addressing unforeseen issues throughout the contract’s term. There must also be provision for NL to access sufficient energy to support growth and development within our provincial economy. Only then can the province hope to secure equitable returns from development of the Churchill River.
Rolly Card, St. John’s