Hundreds of billions at stake as N.L., Quebec draft new Churchill Falls deal
Newfoundland and Labrador has reached a monumental — but tentative — deal with Quebec over power flowing from the Churchill Falls hydroelectric plant that could reap hundreds of billions of dollars over the next five decades.
N.L. Premier Andrew Furey and Quebec Premier François Legault announced the terms of a memorandum of understanding at a news conference in St. John's — one they say means $200 billion for each province over the long term.
In a sweeping agreement that not only replaces a 65-year contract that generations of N.L. politicians have loathed and fought, Furey and Legault also announced plans to develop Gull Island, one of the last great undeveloped hydroelectric plays in North America.
"Today, everything changes for Newfoundland and Labrador," Furey told a crowded audience.
"We are ripping up the 1969 contract. Not in 2041, when it expires, but today."
Later, speaking to reporters, Furey ripped a document to emphasize the point.
Legault also praised the deal, describing it as a "win-win" agreement that will help Hydro-Québec meet its ambitious targets to increase its capacity dramatically in the years ahead, and will open up a major source of new energy at Gull Island that both provinces can take to market.
The MOU is expected to be formalized by 2026.
The new deal also comes with support of the Innu Nation, with Grand Chief Simon Pokue signing the non-binding MOU in St. John's. Innu leaders have for years complained that Churchill Falls was built without their consent on their traditional lands.
Furey later said that Innu will have top priority for hiring for construction jobs for the megaproject, followed by Labrador residents and then residents of Newfoundland.
Under the current 65-year contract, N.L. received just 0.2 cents/kWh. Under the new proposed agreement, that's increased by no less than 30 times to 5.9 cents/kWh.
Over the next 50 years, N.L. is expecting to reap billions of dollars.
In the next 17 years, it will earn $1 billion a year. Starting in 2041, that will double to $2 billion a year, then double again to $4 billion per year in 2056. Escalating clauses will mean increases beyond that point.
Even the smallest payments, of $1 billion each year, could have a dramatic impact in Newfoundland and Labrador, where the most recent provincial budget was $10.4 billion.
For Quebec, the MOU means half a century of reliable hydroelectric power that Hydro-Québec can take to its customers.
Legault said the deal means $200 billion for each province, as well as long-term security for Quebec, too.
"When you're in politics, you have to think about long-term. You have to think about the next generations," Legault, speaking in French, told the audience.
New Labrador hydro developments
The second part of the MOU relates to hydro developments that will significantly boost the power available to Labrador to 1,990 megawatts.
The long-discussed Gull Island hydroelectric project — a separate undeveloped project downstream on the Churchill River — is also on the table.
The project, which received an environmental assessment in 2012, could generate 2,250 MW.
Hydro-Québec would be the project lead and manage its construction, which would also mean it will have to absorb any cost overrun. N.L. Hydro would operate the facility and get access to 225 MW.
The Gull Island project would be a new entity, owned 60 per cent by N.L. Hydro and 40 per cent by Hydro-Québec.
The target date for commissioning Gull Island is 2035, 11 years from now.
N.L. Hydro and Hydro-Québec also want to partner in boosting hydroelectric production at the Churchill Falls plant with a second underground powerhouse built near the existing reservoir. It would generate 1,110 MW.
An environmental assessment will still need to be done, Hydro-Québec would manage the construction and N.L. Hydro will operate the facility once it is completed. N.L. Hydro would also get access to 135 MW.
This expansion will be owned by the Churchill Falls (Labrador) Corporation, with 65.8 per cent owned by N.L. Hydro and 34.2 per cent Hydro-Québec.
Churchill Falls (Labrador) Corporation could also upgrade existing Churchill Falls units, which would increase production to 550 MW.
In this case, N.L. Hydro would be responsible for construction and completion, and build new transmission lines within the province.
The four projects would also mean thousands of jobs, with an average of 3,000 direct jobs during construction, and at its height 5,000 direct jobs. Indirectly, it could reach 9,500 jobs.
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