During the eleven years that I spent on the staff of two Premiers in the 1970s and ‘80s, I learned, among other things, to never let partisanship substitute for sound, sensible, analysis. Smart politicians want the public’s support, but they also want widespread affirmation that their approach to public policy makes sense. When the public does not understand the public policy on offer, the murky, ill-explained Churchill Falls MOU a case in point, what is left except the expectation that the public will reward the incomprehensible with blind faith. That approach may work short-term but when the truth is discovered, just wait for the blow-back. Ask the ghost of J.R. Smallwood.
I especially remember the years after the inequity of the 1969 Churchill Falls contract began to grip members of the public. The sense of unfairness exhibited in the Churchill Falls Contract was rife; it bothered many people to a degree that it became a wound on the collective psyche of my generation.
I witnessed that wound fester in the 1980s and 90s, not just as electricity prices grew and the inequity of the deal became increasingly apparent, but also as Quebec continued to refuse NL transmission rights to develop Gull Island and Muskrat Falls. Quebec had chosen to stymie our economic development potential using its geography to isolate Labrador from market access. Quebec wanted our water resources to meet its economic objectives and it didn’t want to pay for them.
Newfoundlanders and Labradorians watched helplessly, suffering through several Court cases which sought directly or indirectly to change the 1969 Contract, all ending without success.
Characterized by fixed terms and no reopener clause, the inequity of the deal became a festering wound that only got larger. People increasingly realized that their government had literally given away the Upper Churchill for 2/10 of one cent per kWh – representing a few million dollars – for a world-class resource – for 65-years. Workers received the opportunity of jobs under Hydro-Quebec’s hand-picked supervisors, and after a few years they ran out. (We will say the same about Gull Island, too.)
I remember the hurt, and I remember the determination of the people of my generation, many saying: ‘we’ll never let it happen again’.
When NL purchased the shares of BRINCO in 1974, the public generally understood the risks. That meant primarily, failing redress, that the long-term, fixed priced contract would deliver no additional revenue. In those days, the unemployment rate exceeded 15% and, on a seasonal basis far higher. Budget deficits on a scale that we now (unwisely) take for granted were not financeable let alone entertained.
We knew, however, that having purchased the BRINCO shares (bring our ownership in CF(L)co to 65.8%) that with the passage of time, and the expiry of the contract in 2041, a new dawn would break. On the lips of many was the certainty that, even if it meant decades, Hydro-Quebec would eventually be forced to negotiate on our terms.
Time passed, electricity prices soared, and leverage over Hydro-Quebec increased as 2041, the expiry date of the Contract came into view.
My generation was a patient lot. Patient as we were, however, we were never clairvoyant.
None of us could have imagined that another government would squander the opportunity we would have to benefit from our natural resources a second time.
For many who remember those years, the incredulity of what has occurred – specifically the signing of the MOU – is so absurd that it is almost too painful to bear.
The absurdity is so great that it begs questions like: did we raise a generation with no backbone? Is Premier Furey and Premier John Hogan representative of this kind of spinelessness?
All Hydro-Quebec had to say to Premier Furey: if you don’t capitulate a second time, Quebec will build replacement power in Quebec, even if it costs three times as much!!! The young, naïve Premier Furey, drank it all in.
He did not understand that Hydro-Quebec did not become one of the most successful power corporations in the world by being THAT DUMB!!!
A reasonable assumption by the public might have been that considering the unique circumstance of the 1969 Contract, especially its duration and the value denied us as a province, that the public would have been consulted before any negotiation commenced.
Many of us wanted to hear the objectives of any negotiation. We wanted to hear first-hand the logic of why this should occur so early. Many of us would have counselled that no renegotiation should begin. What was the hurry? Smart negotiators would want to build maximum leverage over Hydro-Quebec…to not give them a break! Call it our reward for their greed and intransigence.
That is one dimension of the issue.
Another begs this question: Is it impossible that Google, Meta, Apple, Microsoft or Amazon might consider Labrador a suitable and safe place for their technologies and for the data storage that now consumes electricity on a scale demanded by large cities? It sure seems a better place than relocating data to centers in outer space, as lately some have suggested.
But to the point, are we so lacking in creative ideas that when we have in our hands one of the best renewable energy generators on the planet, we cannot think how WE might fit into the opportunity afforded by this new technology paradigm?
Consider, too, what has been said about the MOU.
Based on the calculation of Mike Wilson who resigned from the Government’s Oversight Panel because its independence had become “impaired”, he states that we are providing a wealth transfer of $131 billion to Hydro-Quebec from the existing Churchill Falls project alone – worse than 1969. He states that the effective average price to which NL has agreed to sell power to Hydro-Quebec is 2.7 cents (present value) not 5.9 cents per kWh as NL Hydro’s Jennifer Williams claims.
It gets worse.
Even if the “starting price of 5.9 cents (2024 dollars) in the Williams model (was correct) it is at least 55% lower than HQ’s current replacement cost.”
Now, consider that the replacement cost of this power for Quebec is about 16 cents per kWh.
Translated in revenue terms, under the MOU, NL receives $423M ($2025) per year on average. Using the replacement cost for Quebec of all this power, NL should receive about $3 billion annually.
Premiers Furey/Hogan are content with $423M versus $3B. How can that be either explained or excused?
There are other elements of this massive giveaway. As to the proposed two expansion projects, amounting to 1,650 MW (twice the generating capacity of Muskrat Falls), Hydro-Quebec effectively buys all of this power at cost for 4 cents per kWh and the right to sell it for 16 cents kWh (equivalent to a 400% return) or any higher amount they can achieve. NL’s return is capped at about 5% per annum.
Then there is Gull Island. Our GNL does not tell that the MOU commits NL to invest $ 24.5 billion in Gull Island and new transmission lines in Labrador on a basis where Quebec gets to keep and resell virtually all of the power and reap all of the benefits.
Considering Newfoundland and Labrador owns 65.8% of the Churchill Falls plant, essentially we have awarded Quebec more than the revenue equivalent of our majority ownership!
How is this not incompetence?
Whether people understand the MOU or not, whether they forgive NL Hydro’s selective grant of information, what no one can mistake is that the evidence seems pretty clear that we had better slow down the execution of any final agreement, find expert and independent analysis – not the partisan kind now on offer – and provide time – WITH THAT INDEPENDENT ANALYSIS – during which we should guide the government to a decision. And it should listen to us.
We stand to lose billions of dollars – for a second time – on the heels of Muskrat Falls and a crushing public debt (the amount of which the media can’t seem to get right).
The Government plans to throw away the one opportunity that we have in our grasp to remediate those mistakes.
Premier Hogan may be content to live with that legacy.
As for the rest of my generation, we should rail against the Churchill Falls MOU with every ounce of energy that our aging bodies will afford!