Premier Tony Wakeham’s Memorandum of Understanding with Hydro-Quebec (HQ) is generally known as MOU 2, to distinguish it from the MOU negotiated under the government of Andrew Furey. Analysts have spent much time demonstrating that first, both MOUs fail to offer NL net revenues proportionate to our ownership stake in CFLco, the company operating the Churchill Falls facility. Second, both fail to compensate the province, through rents and royalties, for the use of our water resource to generate electricity.
This latest proposed deal, like the earlier one, has been declared a massive failure. So, where do we go from here? What can the public say to convince our government to rethink making this historic blunder, one that many experts conclude would be a bigger mistake than the 1969 Churchill Falls contract?
The alternative is simple. There are 3 basic steps.
Step 1
Start by walking away from a bad deal, where the other side asked too much and offered too little. This was true of the recent Canada-U.S. trade negotiations and it’s true of the Churchill Falls negotiations.
Step 2
Step back and take time to prepare for future negotiations. When the Independent Review Committee and a multitude of analysts and critics told the government to prepare and not to rush back to the negotiating table, it did the opposite.
NL is not under pressure to enter into a deal. The time pressure is HQ’s. Quebec needs Churchill Falls energy and wants to secure its supply now. We should take note that huge increases in the demand for electricity and the cost of constructing new generation sources have given NL a great advantage: the time to put in place a world-class negotiating foundation for reaching a world-class hydroelectric power deal.
As mentioned, many of NL’s brightest and most experienced have studied and posted details of how to build a strong negotiating structure. Countries and states around the world with power generation facilities have led the way. They implemented structures that ensure market-based returns for their resources. Their experiences provide a blueprint for exactly what we need to do. It’s clear that it can be done. The precedents are there.
The Independent Review Report underlined this. Sadly, for some reason, Premier Wakeham didn’t follow his committee’s advice. Now, the public must say to him: “JUST DO IT!” We can’t afford not to. It would take about a year to establish this framework and foundation.
Step 3
Once we have a strategy in place, one that at least equals HQ’s, we announce we’re ready to commence talks. At that time, we’ll negotiate as equals with the other side. It’s also worth noting that every month that passes, NL’s leverage continues to increase, as the pressure grows on HQ to secure a deal.
Now, let’s address two false stories you may have heard.
First, that HQ will not wait for us to prepare and it will look elsewhere for power. That argument represents the position of amateurs.
Churchill Falls has the most desirable hydro-electricity attributes in the world. They are:
- Cheap power — as the plant is debt-free and produces energy that is virtually free
- Highly dispatchable power
- Highly reliable power
- Massive hydraulic-head
- Renewable power
- Power backed up by a huge water reservoir
- Transmission infrastructure in place
An alternative to CFLco’s more than 5,000 megawatts of power with these attributes simply doesn’t exist. There is no chance that HQ walks away.
But, what if it does? The world has changed since the 1969 Churchill Falls agreement was signed. HQ is no longer our only option. We’re told that our government is working on an industrial and economic alternatives plan. It will demonstrate that we have excellent options for attracting customers for our hydro power. It’s these options that will provide the opportunity to create real employment and replace dubious promises of jobs under MOU 2.
The second false story is we can’t afford not to take this bad deal. Again, that’s an amateur perspective.
The province is not in a good financial situation. We’ve known that for years. Yet, we’ve survived. In a short period of time, the 1969 contract ends and we’ll get back control of Churchill Falls. Then, we’ll own 65.8% of the annual $4-5 billion in revenue from Churchill Falls. That’s about $2 to 3 billion a year in today’s value for decades and decades — as long as the plant operates. That’s so far beyond what we would get from MOU 2 that a comparison is ludicrous.
To put it another way, when the 1969 agreement ends, the amount of our annual revenues from CF will give us, our children and our grandchildren every opportunity for excellent health care, education, social programs, jobs and much more.
So, there is an alternative. It’s simple. Choosing it is wise. When we take time to prepare we will become a far richer province. We’ll be able to hold our heads high as good stewards of our resources. We’ll take pride knowing we are a strong partner with Quebec and a great contributor within Canada.
With Gabe Gregory and Des Sullivan