Da Legal Stuff...

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Friday, April 01, 2005

Thank-you for Letting Us Develop the Lower Churchill

Boy, I can’t wait for all of that lovely Quebec power to start flowing from Gull Island and Muskrat Falls. I bet when they get all that power moving there will be champagne wishes and caviar dreams for all. After all, it’s been a dream of Quebec Hydro to develop their two big river projects for some time. It’s just too bad mean old Newfoundland and Labrador has been keeping them from what they deserve.

It sounds odd doesn’t it, but if you have read any of the news articles around the proposed Lower Churchill development over the past 24 hours, this is the impression you would get.
I don’t know about you, but if I were Danny Williams reading those stories, I wouldn’t get a very warm and fuzzy feeling about the intentions of Ontario and Quebec.

I realize that news reports, especially early ones, need to be taken with a grain of salt. That said, since much of the content of these articles is coming directly from the good folks involved in pulling together the proposal, one also has to sit up and take notice.

The comments, from the interested parties, that I’ve read so far don’t exactly make me feel that they intend to treat Newfoundland and Labrador as the owner and supplier of something they would like to purchase. To the contrary, they have the sour flavor of showing the arrogance we often associate with big players when dealing with the little guy.

Shades of Upper Churchill come to mind.

One article states that according to the plan, Ontario would receive about one-third of the power from the projects, Hydro-Quebec would take the rest.

My math is a little rusty. Maybe someone out there can tell me how much power this leaves for the owners of the resource. Let’s see:

100% - (33.3% + 66.6%) = 0.1%

Well, that’s not bad. I may have a little rounding issue there, but hopefully that’s enough to run the station. At least then we won’t have to purchase some of that power from Hydro Quebec to keep the plant running for them. Oh yeah, that’s right, we wouldn’t be able to do that either because:

Thierry Vandal, president of Hydro-Quebec Production, said the Quebec utility would sell its two-thirds share of the Labrador power on wholesale markets in Quebec and beyond.

I guess we’ll just have to make sure we keep that 0.1% so we can ensure that Hydro Quebec’s customers don’t get upset. Maybe, while we're at it, we should also build a new bunker sea burning plant to provide power in the province for any future industrial development we hope will come along. After all we don’t have enough power now to supply them.

Other comments I’ve read on the proposed deal state:

The Ontario-Quebec bid includes two options:

Under the first, a joint venture company would lease the Gull Island and Muskrat Falls sites for 50 years.

Under the second, Ontario and Hydro-Québec would negotiate an agreement under which Ontario would purchase energy. Newfoundland and Labrador would finance construction.

Let’s examine these for a minute shall we.

The first option sounds very reminiscent of the original Churchill Falls deal. In this scenario we sign over the power for a 50 year period, however if we forget to include a comma at line 4,116 in paragraph 137, then we had better watch out.

My take on this one is, if this is the only option, get a team of lawyers and have them examine the contract for no less than 51 years.

But wait, that’s not the only option. There is an option that looks better. Newfoundland and Labrador can fund the construction and simply sell the power (that’s what we wanted isn’t it?).
This option sounds great until you look at the price tag.

According to Ontario, the projected price tag is between $3 and $6 Billion. This is probably conservative since Quebec Hydro pegs the total at up to $9 Billion.

These numbers are a lot of money by any standard. In this light, we have to believe that the proponents of this deal don’t really expect us to choose the second option. I mean how could anyone expect a poor province, that is $11 Billion in debt, to finance a project that would cost another $9 Billion?

You know, maybe it's just me, but I think those pesky little Quebec Hydro folks are at it again. Then again, maybe we really do have 2 options.

Take the first option or don’t develop the project.

It looks like Quebec Hydro has learned a valuable lesson from the first Churchill Falls agreement. The lesson is: “If we word it right, we can really screw over the province of Newfoundland and Labrador.”

Let’s just hope our politicians here at home have learned some lessons as well.



Tyler from Torbay said...

In my opinion, Hydro Quebec wouldn't leave us with enough power to run a light bulb if they could find a way to take it. I hope Danny goes into any talks with these guys with his eyes very wide open.

Mike said...

April 4th.

Danny Williams is holding a press conference this afternoon to give an update on the responses to his calls for proposal on the Lower Churchill. This should be interesting. Hopefully there are others interested besides Ontario/Quebec. Competition is a good thing.

Patriot said...


I couldn't agree more. It would put us in a pretty precarious position if this is the only expression of interest. I suspect that there are others though.

Anonymous said...

Well, it looks like we have several expressions of interest. At least 10 for the full development. Hopefully at least 3 or 4 of those will make the short list.

I'm glad Quebec and Ontario aren't the only choice here. If they were, not only would we be stuck with them, we wouldn't even have any bargaining power.

I wonder if anyone in the US has jumped into this? The US needs more power badly and US companies can sure afford to get the job done. This might be interesting. Can't wait to get some details on the short list in a few months.

Keep up the good work on this site, its very informative and I love the commentaries. Funny stuff.

nearthesea said...

I like your style on this blog.

I have not had a chance to go through the Terms of Union but I think that before we make any deals on the development of the new hydro project we should at least have the Terms of Union changed in our favor so that Quebec can no longer block us from selling our power.

My understanding is that at this time we are not being treated fairly under the constitution and free trade agreement.

Until Newfoundland and Labrador is not held hostage by Quebec borders we should not be considering developing this project let alone entering into any proposals or agreements with Hydro Quebec.

Have we learned nothing from our mistakes?