Ottawa, Newfoundland promising to shield ratepayers from Muskrat Falls cost overruns
As Quebec Premier François Legault seeks a new energy deal with Newfoundland and Labrador, he faces a public in the Atlantic province scarred by the legacy of a pair of hydroelectric projects mired in missteps.
Legault travelled to St. John's this week for discussions with Newfoundland and Labrador Premier Andrew Furey about the 1969 Churchill Falls hydroelectric energy deal — and what will come after it ends in 2041. The lopsided deal heavily favours Quebec, and has left a lasting bitterness in Newfoundland and Labrador.
The two leaders are scheduled to speak with reporters later on Friday after the meeting.
Jeff Webb, a historian at Memorial University, says some residents of Newfoundland and Labrador think the province wouldn't have endured the "humiliation" of needing equalization payments from the federal government if the Churchill Falls agreement had more evenly served both provinces.
"It does speak to people's sense that this is something that's always been rightly ours, and it's been stolen," Webb said in a recent interview.
Decades later, that hostility drove people in Newfoundland and Labrador to embrace the Muskrat Falls hydroelectric project, which is long delayed and draining the provincial purse, Webb said.
The 1969 Churchill Falls deal allows Quebec's provincially owned hydroelectric utility, Hydro-Québec, to purchase 85 per cent of the electricity generated by the dam in Labrador, and therefore reap most of the profits. As of 2019, the deal had yielded close to $28 billion in profits to Quebec, and about $2 billion for Newfoundland and Labrador.
Under the agreement, Hydro-Québec pays a fixed price of 0.2 cents per kilowatt hour for Churchill Falls power. By comparison, the utility said in a news release this week it made an average of 8.2 cents per kilowatt hour on power it sold outside the province in 2022. Hydro-Québec made a record-breaking income of $4.6 billion last year, the release said.
The Innu of Uashat mak Mani-utenam in Quebec filed a $2.2-billion lawsuit against Hydro-Québec earlier this year, claiming the Churchill Falls hydroelectric station has destroyed a significant part of their traditional territory. In 2020, the Innu Nation in Labrador launched a $4-billion lawsuit against Hydro-Québec and Churchill Falls (Labrador) Corp., a subsidiary of Newfoundland and Labrador Hydro, for the ecological and cultural damage caused by the damming of the upper Churchill River in the early 1970s.
Pam Frampton, who retired in 2021 as the managing editor of The Telegram newspaper in St. John's, said she grew up under the shadow of Churchill Falls.
"There was always these associated feelings of shame and bitterness, and the feeling that we had been duped," Frampton said in an interview.
Frampton said she believes the province would be in a completely different economic position now if the Churchill Falls arrangement had not been so skewed.
"Wanting to give Quebec the middle finger, if you will, was a part of the impetus behind Muskrat Falls," Frampton said. "I think if we had a fair day's deal with (Churchill Falls), we wouldn't have been so hell-bent on getting (Muskrat Falls) developed at any cost."
Like the Churchill Falls project, the Muskrat Falls development harnesses the power of the Churchill River, in Labrador, and it also sits on traditional Innu territory. It was green-lit in December of 2012 after much trumpeting and fanfare by the Progressive Conservative government at the time, particularly by premier Danny Williams, who quit politics in late 2010.
Muskrat Falls has been disastrous for the province's finances and morale. Its price tag now sits at more than $13 billion, a figure Andrew Furey described in 2021 as "an anchor around the collective souls of Newfoundland and Labradorians."
Legault has said he wants a "win-win" deal for Quebec and Newfoundland and Labrador — and has even suggested paying the province more for electricity before the current deal ends in 2041.
Frampton said the Quebec premier needs to know that the people of Newfoundland and Labrador are hardened and still smarting from both projects.
"I think he needs to know that, going in, we are gun shy, and for good reason," she said. "He should expect us to ask the hard questions. And I certainly hope to God our government does, on our behalf."
This report by The Canadian Press was first published Feb. 24, 2023.