Wednesday, September 19, 2012

'An un-Canadian act' - Power Struggle Part 3 of 12

Province considered flicking switch on Upper Churchill

“If necessary and if forced to do so, we will go all the way and risk the consequences no matter how great. After all, nothing could be worse for Newfoundland than allowing the present contractual situation to continue.”
— A 1982 provincial government cabinet document that explored shutting down the Upper Churchill hydro project. 

Third in a 12-part series. 

The defunct weekly provincial newspaper, The Independent (2004-2008), carried out extensive research and investigation into the Upper Churchill. From the contract’s signing in the 1960s, to the realization of its incredible lopsided nature towards Quebec, the shadow of the deal looms today over the potential development of Labrador’s Muskrat Falls. The following is the 3rd in a series of 12 articles published in The Independent

Clare-Marie Grigg
The Independent
April 1, 2006

The Newfoundland government considered shutting down the Upper Churchill hydro project in the early 1980s as a means to seek redress on the lopsided contract with Quebec, a cabinet document reveals.

The document, Summary of Hydro Potential of Major Undeveloped Inter-Provincial River Systems between Newfoundland and Quebec, was compiled by Newfoundland and Labrador Hydro for the provincial cabinet in 1982. 

It was written in the run up to a court case spearheaded by then-premier Brian Peckford — to regain provincial rights to the Churchill Falls water lease.

“Newfoundland’s bargaining strength is based on our odds of winning; our outward signals of strength and determination; our lack of anxiety towards negotiations; and on Quebec’s perception that we are deadly serious in a situation which can cause them real electrical, financial and political difficulties,” states the document obtained by The Independent

Frustrated by Quebec’s massive financial gains from the Upper Churchill project (estimated at up to $2 billion last year alone, compared to Newfoundland and Labrador’s $32 million), Peckford embarked on a mission to renegotiate the terms of the 1969 contract and develop the Lower Churchill. 

The primary purpose of the cabinet document was to show the hydro potential of five river systems spanning the Quebec/Labrador border for potential use as bargaining chips in any negotiations.

The report outlines the possibility of the province legally shutting down the hydro development under 92a, a section of the Constitution dealing with the inter-provincial trade of electricity. 

The clause could potentially allow for a provincial tax on power sold outside the province. 
“The real issue in the pricing option is whether Quebec would have the ability to refuse to pay the increased price and in turn whether Newfoundland could finance a shutdown of the Churchill plant under such circumstances,” the document states.

“Are we prepared to spill the entire production of the Churchill plant down the river? For how long? Are we capable of financing the outstanding CF(L)Co debt?”

The paper suggests awaiting the results of the province’s court case before proceeding with any "drastic action."

“Prolonging the Upper Churchill dispute and taking financial and electrical risks in the face of a determined Newfoundland, is something Quebec wants to avoid,” states the report, which also highlights the problems of switching off Churchill power.

"Such an action would create a very significant national problem and there would be immense pressure on the Government of Canada to step in."

“While one might argue that this might force Canada to impose a settlement which might be better than no settlement at all, it is very unlikely to produce a settlement acceptable to Newfoundland. Surely, the Government of Canada would not want to be seen to be rewarding Newfoundland for what they will no doubt perceive to be an un-Canadian act.”

Peckford’s Water Rights Reversion Act was eventually overruled in the Supreme Court of Canada, but not before Hydro-Quebec signed a 1984 statement of intent acknowledging inequities in the upper Churchill agreement and promising to renegotiate to the satisfaction of both provinces. 

With the loss of the court case, however, negotiations eventually died and no resolution was ever reached.

Newfoundland and Labrador’s failure to secure an equitable deal after 1984 seems at odds with the province’s fighting spirit, outlined in the 1982 report.

“If necessary and if forced to do so, we will go all the way and risk the consequences no matter how great. After all, nothing could be worse for Newfoundland than allowing the present contractual situation to continue.”

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