User:HJKeats/Churchill Falls Contract

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Newspaper Article Sunday Independent Royal Commission Report a pdf file Re Upper Churchill Water Rights Reversion Act Churchill Falls Churchill River (Atlantic) British Newfoundland Development Corporation Churchill Falls Labrador Corporation Limited Newfoundland and Labrador Power Commission

The province is currently considering a handful of proposals for the future development, and Hydro-Quebec is one of the short-listed companies.

Energy experts across the country say they doubt Quebec would ever stand for reopening the upper Churchill deal, whether or not it was tied to the much smaller, yet valuable lower Churchill development.

Jean-Thomas Bernard, an economics professor at Laval University in Quebec and a specialist in energy policy, has been researching Hydro-Quebec for years. He says the “unique” 65-year upper Churchill contract, which essentially doubled Hydro-Quebec as a company, is unlikely to be successfully challenged.

“Every new premier in Newfoundland, ever since the deal was signed, made a point of challenging this contract,” he says. “I think it is doubtful (it will change) because this will mean close to $2-billion increase in the cost to Hydro-Quebec to replace that. It’s a big deal.”

Due to the lopsided nature of the 1969 contract, Hydro-Quebec is currently earning an annual profit of close to $2 billion compared to Newfoundland and Labrador’s $32 million.

What might happen to the contract should Quebec separate.

Thomas Adams, executive director of Energy Probe, an energy watchdog, says he highly doubts Quebec would ever renegotiate the upper Churchill.

Former Newfoundland and Labrador premier Brian Peckford fought hard to overturn the contract during his tenure. He hired a team of lawyers to investigate the deal and twice took the matter to court — unsuccessfully.

Ambrose Peddle was a member of the official opposition in 1968 when then-premier Joseph Smallwood pushed the House of Assembly to approve the recently negotiated deal — quickly, without any fuss. "We were in our office waiting for the afternoon session and who but Mr. Smallwood should come up to visit us and he said ‘Gentlemen, I have a proposition. I have a deal on for Churchill Falls, but it’s going to call for a quick agreement from the opposition, no fooling around.’ And there wasn’t a man there that didn’t approve of it."

What the opposition didn’t know at the time was the reason for Smallwood’s haste. According to a recently published paper by two Memorial University professors, the company in charge of developing the project for the province — the Churchill Falls (Labrador) Co. (CFLCo) — was being held in a do-or-die situation. Either an agreement was signed on Hydro-Quebec’s terms, or the company and the development of the project would fold.

Had it not been for a gun-to-the-head implementation of a non-negotiable 25-year renewal clause, Newfoundland and Labrador would be looking forward to starting renegotiations of the contract in as little as a month (2006). As it stands, the province is facing losing even more money throughout the last 25 years of the deal, due to the expiration of a federal tax break.

In the paper, James Feehan and Mel Baker suggest the business ethics employed by Hydro-Quebec at the time of negotiations could perhaps hold legal implications, which have never been considered before.

Ed Hearn is one of the lawyers hired by Peckford in the 1980s who worked at trying to overturn the contract. He says gaining some kind of control of the upper Churchill is more important than developing the lower Churchill.

Section 92a of the revised Canadian Constitution is another legal option yet to be explored in relation to the upper Churchill deal. If implemented, the clause would give the province the power to tax hydroelectricity. It would mean millions of dollars more in revenue to the province, but it would also send a message to Hydro-Quebec.

“I think unilateral action to deal with the upper Churchill is what’s needed imminently,” says Hearn. “I think the best course of action is a taxing approach … it gets money flowing.”

He compares it to taxing gas at a pump; you don’t get the gas unless you pay the tax.

“It’s the same approach that we ought to be taking in relation to all our electrical energy, including that exported, which means we would have to tax ourselves and also apply that tax to energy exported at Churchill Falls and make it a condition of sale.”

“The federal government has gotten a major benefit from the fact they don’t have to pay equalization payments to Quebec, because Quebec has the benefit of the Churchill revenue and we don’t. They’ve saved quite a bit, so therefore they have an obligation to the people of Newfoundland and Labrador to be involved in a solution here.”

The federal government was also responsible for mistakenly withholding untold millions of dollars in equalization from Newfoundland and Labrador during the first 10 years of the upper Churchill contract. At the time it was making payments to the province as if Newfoundland and Labrador was receiving the full cost of the hydro power. That amount has never been refunded.

Adams says federal government involvement in anything to do with Churchill power and Quebec will never be allowed by that province.

“The matter has been debated at the National Assembly in Quebec,” he says, “and for both parties, the Liberal and the PQ, the pinner of that debate has been both parties committing to be stronger than the other party in blocking any participation by the federal government in any matters relating to cross jurisdictional transmission of power from Labrador.”