Wednesday, September 19, 2012

Power struggle - Power Struggle Part 5 of 12


A 1980 television show delved into the battle to develop the Lower Churchill — a story only too relevant today 

“From a dollar and cents point of view, I think it (the Atlantic route for Lower Churchill power) makes a lot of sense. It makes the province of Newfoundland totally independent. It gives them an alternative to the monopoly that Quebec now has on the distribution of the Labrador-introduced power.”
— Franklyn D. Rossevelt Jr., chairman of the board of directors of Atlantic Energy, a resource development company that acted as an energy broker. 1980. 

Fifth 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 5th in a series of 12 articles published in The Independent


By Ryan Cleary
The Independent
Nov. 14, 2004

In 1980, the local CBC Television show On Camera investigated the Lower Churchill and where things stood. 

At the time, the State of New York was desperate for power and then-premier Brian Peckford was in a war with the federal government and Quebec over a power corridor through that province. 

The following story is based on the On Camera program, a two-part series.

Muskrat Falls, situated on the Churchill River, is capable of generating 618 megawatts of hydro power each year. 

That’s small compared to the Upper Churchill project, which produces 5,428 megawatts. 

In the early 1980s, the cost of developing Muskrat Falls was pegged at $3.2 billion.

The cost of developing the bigger hydro project at Gull Island, about 225 kilometres downstream from the Upper Churchill project, was estimated at $4.3 billion (again, these estimates were made in the early 1980s). 

Gull Island is capable of producing 1,700 megawatts of power — almost triple the output of Muskrat Falls. 

Construction began on development of Gull Island in 1973, but two years and $70 million later the development was cancelled because of problems with marketing and financing. 

A decision to go ahead with Gull Island would probably be based on the sale of the majority of Gull’s power to an external market in Canada or the United States. 

Power from Muskrat Falls would be used for the province’s own energy needs. 

There were, and are, two ways to get the power from the Lower Churchill to export markets. 

Gull Island electricity would be sent through a transmission line to the existing station in Churchill Falls. 

From there, another parallel circuit would be added to the existing three, to transport the power to Quebec. 

In all probability, a second circuit will be needed to carry the required power to the New York market. 

The second option is the so-called Atlantic route, which would funnel Gull Island power through the main generating station in Churchill Falls, and back past Gull Island to the southeast tip of Labrador. 

From there, the power would cross the Strait of Belle Isle by means of an underwater sea cable, and land on the Northern Peninsula. 

The transmission lines would then travel down to the southwest coast.

The power would cross the Cabot Strait, then surface again in Cape Breton to begin its track across Nova Scotia and New Brunswick. The hydropower from Gull Island would then reach its final destination in New York.

•••

Former premier Peckford wasn’t interested in the Atlantic route because, he argued, it would cost more, cutting into the province’s end profit. 

He felt the province had the constitutional right to transmit electricity through Quebec. 

Further, he argued that Ottawa wasn’t living up to its responsibility by not forcing Quebec to allow a power corridor through its territory.

"We’re not going to get the same value out of a resource that we could of got,” Peckford told On Camera. “They (the federal government) have not lived up to their responsibility and we’ve got to force them to do it (put a power corridor through Quebec).”

Peckford told then-prime minister Pierre Trudeau that he must exercise, what he saw as, Ottawa’s constitutional right to intercede and allow the power corridor through Quebec.

At the time, Trudeau said electricity has to be treated the same as the passing of oil and gas through a province. 

“I’m telling you now, you’re afraid of two might-bes ... that Quebec wouldn’t make a reasonable deal with you, and second that you would have no right under the constitution to apply for passage,” said Trudeau. 

“And I’m telling you that as far as we’re concerned ... if Quebec refuses passage of that particular good or service, we would have to take our responsibility. But they haven’t been asked and how can you assume they will refuse.” 

Then-federal Energy Minister Mark LaLonde wasn’t so definitive when answering questions on whether Newfoundland and Labrador has the right to put a power corridor through Quebec. 

He preferred that the two provinces negotiate.

“Well, we have indicated in the past, I have indicated in the past, that if there was fair evidence that the negotiations were impossible between the two provinces by themselves, the federal government was ready to try and help,” LaLonde told On Camera.

He said Quebec has the right to say no to a power corridor.

“It has the right, the question is does the federal government have the right to intervene? I suppose to those questions, my answer is yes to both. Provincial governments can always say ‘No, I won’t co-operate, you won’t use my grid,’ and then the federal government has the power, I suspect under the Constitution, as it has the power to build pipelines.”

•••

A power corridor through Quebec made some financiers on Wall Street nervous because of the separatist movement. 

Then provincial-Energy minister Leo Barry (he later became a judge with the Supreme Court of Newfoundland and Labrador) said Ottawa was exercising political favouritism by not forcing Quebec to allow a power corridor.

“Well I think we don’t have to stretch the bounds of the imagination to realize that when Quebec supplies the government in power close to one half of their seats, if not more, then they are going to be reluctant to do what, as the government, the responsible government, they have the clear duty to do,” Barry told On Camera

•••

Quebec Liberal leader Claude Ryan said at the time he didn’t feel the Government of Canada could do any more than suggest that Quebec allow a power corridor through the province.

“So unless it were to be declared a matter of national interest, and even there, the jurisdiction of the federal government would be highly dubious, you know,” Ryan told On Camera. “It has to be decided between Quebec and Newfoundland. It may serve as interpreter of the needs of one province … provided it is not done in an authoritarian fashion.”

•••

In the early 1980s, the Power Authority of the State of New York was desperate for a clean energy source to get away from its reliance on foreign oil. 

It was estimated that the sale of Gull Island power to New York could give Newfoundland and Labrador up to $400 million a year. 

Then-chairman John Dyson said the power authority would look for a guaranteed 30-year supply of electricity.

He didn’t care if the power was brought to market via the Atlantic route or through Quebec. 

Nova Scotia would have gained from the Atlantic route, which would have transmitted energy from that province — specifically the Fundy tidal project — to the northeastern States. (The full tidal project, which would have been the largest of its kind in the world, never went ahead.)

“Newfoundland can transmit power across our province tomorrow if they want to,” then-Nova Scotia premier John Buchanan told On Camera.

Dyson and the Power Authority of the State of New York did not have a preferred route.

“There are certain advantages to going that (the Quebec) way, there are certain advantages to going with the so-called Atlantic route,” he said. “I am at this point undecided to which one I would prefer. I think it relates to lots of questions which have yet to be reconciled, which include political and economic as well as engineering calculations ... the reality of one electrical system over another.”

The power authority was also prepared to finance the project, at least partly. 

“We would have to play a major role in that I think, in financing at least the United States part of it through any of several different states, but any way you go it’s at least three or four states before it comes to New York, plus two other provinces of Canada. That will require a lot of negotiations and a lot of financial sleights of hand I think, probably before we get finished. That will take time, but if that can be worked out so that it’s economical we would be prepared to do that.”
 
•••
 
Atlantic Energy was a resource development company that acted as an energy broker. It was in the business of finding a credit-worthy market that needed power, then assigning the power source. 

In this case, Atlantic Energy knew that the Power Authority of the State of New York needed hydro power, it also knew the great potential in the Lower Churchill. 

Chairman of the board of directors of Atlantic Energy, Franklyn D. Roosevelt Jr., told On Camera the province of Newfoundland and Labrador should go with the Atlantic route as a means to get power to New York. 

Roosevelt argued the cost of a power corridor through Quebec would almost equal the Atlantic route, a difference of only $19 million.

“From a dollar and cents point of view, I think it (the Atlantic route) makes a lot of sense. It makes the province of Newfoundland totally independent. It gives them an alternative to the monopoly that Quebec now has on the distribution of the Labrador-introduced power.”

Vic Young, then-chairman of Newfoundland and Labrador Hydro, argued the cost of the Atlantic route would be much higher.

•••

In the end, Peckford’s war with Quebec eventually killed the Lower Churchill development. 

He tried to regain control of the Upper Churchill by attempting to take back the water rights, but eventually lost out in the Supreme Court of Canada. 

With time running out, the Power Authority of the State of New York proceeded with other power options.

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