Tracking the Churchill deal - Power Struggle Part 1 of 12

“Beamed Smallwood: ‘Glory hallelujah; praise God from whom all blessings flow!’ The $1.1-billion Churchill Falls project, he prophesized, would make Newfoundland ‘the most industrialized province in Canada.’”

— Time Canada, Oct. 14th, 1966

First 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 1^st in a series of 12 articles published in The Independent. 

By Alisha Morrissey
The Independent 

Dec. 4th, 2005

The Upper Churchill contract is known as Newfoundland’s greatest giveaway. 

But how much attention and scrutiny did the deal get — at least in the media — leading up to the signing in May 1969?

North American magazines and newspapers in the 1960s covered the Upper Churchill deal with little intensity and little insight, although coverage did pick up in later years.

The following are a few excerpts:

The Atlantic Advocate, June 1963

“It was Smallwood’s oft repeated assertion that the hydro of the Hamilton Falls (later renamed Churchill Falls) will someday drive the subway trains of New York … Newfoundland gets first call on all power with the surplus available for first call by Quebec.”

TIME Canada, Oct. 14, 1966

“All afternoon St. John’s cab drivers and Cabinet ministers, businessmen and housewives hovered near radio and TV sets, as if the fate of Newfoundland hung in the balance, fretting over the reports that Quebec’s Union Nationale government was seriously divided on whether to buy the potential 4.6 million kw. of power from Labrador’s Churchill Falls.”

• “At 8:20 p.m. the bulletin QUEBEC AGREES TO SIGN was flashed to St. John’s and Newfoundlanders went on a jubilant jag, toasting Quebec, Churchill Falls, each other, and most often of all the man who wasn’t there — Joseph Roberts Smallwood.”

• “Beamed Smallwood: ‘Glory hallelujah; praise God from whom all blessings flow! The $1.1-billion Churchill Falls project, he prophesized, would make Newfoundland ‘the most industrialized province in Canada.’”

• “Churchill Falls is the centerpiece of Operation Bootstrap that Joey considers no less than ‘a matter of life and death to us.’ Aside from the direct employment, Newfoundland will collect $20 million annually in royalties from the power — equal to one tenth the province’s present revenues.”

The Evening Telegram, May 13, 1969
(Canadian Press copy from Montreal)

• “Churchill power deal signed by Quebec,” read the headline. “An agreement was signed Monday under which Hydro-Quebec will purchase electricity from the giant hydroelectric development at Churchill Falls in central Labrador.”

• “The Contract will enable Hydro-Quebec to purchase almost all the power from the Churchill Falls development at a price lower than that of any alternate source.”

The Evening Telegram, May 14, 1969
(Canadian Press copy from Quebec)

• “Quebec paying $5 billion for Churchill Falls power,” read the headline. “Quebec finance Minister Paul Dozois Tuesday night described Hydro-Quebec’s $5,000,000,000 contract … as ‘the biggest power contract ever signed in the world.’”

• “Mr. Dozois described the contract as ‘frighteningly complicated.’ It had ‘enormous advantages’ which he didn’t explain.”

• “In its annual report, tabled Tuesday in the Legislature, Hydro-Quebec estimates the maximum total annual payments for energy will range from $80,000,000 to $93,000,000 until 2016.”

The Evening Telegram, May 30, 1969

• “Churchill Falls deal: Everyone’s a winner,” read the headline. “Fears that Newfoundland came out on the short end of the stick appear to be unnecessary. In fact, Newfoundland seems to have fared very well under the agreement, although on the surface it might appear otherwise.”

• “The attitudes of both Newfoundland and Quebec government leaders and such statements as escaping ‘the clutches of Quebec,’ by Mr. Smallwood, and ‘Mr. Smallwood can entertain in his head all the lovely plans he likes,’ by Mr. Lasage, did nothing to speed up the development and can be partially blamed for the increased cost from $700 million to $950 million.”

• “Quebec had originally argued that the price of the power was too high: it wanted the falls expropriated, elimination of BRINCO and reduction of power costs by eliminating certain taxes; use of Quebec workers and exclusive use of Quebec materials on the project. Quebec also wanted the power delivered inside Quebec and changes to the Quebec-Newfoundland border in Labrador. The boundary had been defined in 1927 by the Privy Council but never accepted by Quebec.”

• “Newfoundland retains a small portion of the power — 2,362 billion kilowatt hours per year, gets $27 million a year in royalties and taxes and does not risk holding the financial bag if something goes wrong.”

The Financial Post, April 10, 1976

• “Newfoundland’s return was to be approximately $600 million — less than $10 million annually. There was no escalator clause to permit upgrading of these royalties.”

• “Quebec acknowledges that Newfoundland is interested in an attempt at renegotiation terms of the ‘giveaway’ contract … (Quebec is) not interested in giving away any of its advantages unless there was some new quid pro quo, perhaps a deal involving control over rivers. The very suggestion has already raised hackles locally where it is recalled that during the original Churchill Falls negotiations premier Joseph Roberts Smallwood and Premier Jean Lasage of Quebec had been seriously considering a ‘swap’ or territory involving the contentious Quebec-Labrador boundary.” 

The Wall Street Journal, Nov. 24, 1980

• “Brian Peckford, premier of Newfoundland, told a group of U.S. journalists last week that ‘after years of grabbing away all our resources we are trying to grab them back.’”

The New York Times, Nov. 23, 1980

“The Newfoundland government introduced legislation today that would allow it to seize the water rights to the giant Upper Churchill Falls generating complex in Labrador, a move certain to worsen an already bitter conflict between it and the province of Quebec over the sale and transmission of power from the shared project.”

• “If the province does gain rights to Churchill Falls’ power, it apparently already has two almost certain customers to buy it. The New York State Power Authority has signed a letter of intent … (and) a Norwegian has expressed interest in building (an aluminum smelter) at Goose Bay.”