Can Newfoundland and Labrador Develop Churchill River on its Own?

Since the Lower Churchill development short list was announced by Premier Danny Williams yesterday, the topic of who should actually develop the mega hydro project has moved front and center in the minds of many Newfoundlanders and Labradoreans.

What will no doubt shape up to be a lively and exciting debate over the coming months, has begun in earnest. Open line shows are buzzing and coffee shop commentators are quickly choosing sides. The ideas are flowing faster than the double doubles.

A straw poll (that is to say, my ear has caught much more of one comment than another) shows that at this point, the overwhelming sentiment is in favour of a provincially developed project rather than a partnership with any of the outside proponents, especially Hydro Quebec.

Premier Williams stated yesterday that with Newfoundland and Labrador’s improved financial situation, due in part to offshore oil revenues, that provincial development is an option to be considered. The statement may be nothing more than a bargaining chip he intends to use in future negotiations, but if you add to that statement the long standing mistrust existing within the province when it comes to outside interests –

- The one sided deal brokered for the Upper Churchill hydro project;

- What was seen as an outside company, FPI grabbing fishing quotas from Harbour Breton and in essence leaving the town to die;

- The current resource grab being made by Abitibi Consolidated in the province,

to name just a few, and you have a climate where it may be difficult to sell any other option. The reality of the situation is that the people of the province are not only concerned about another “bad deal” but they are also hungry to try a project on their own.

Perhaps it represents a sort of “coming of age” for the province. Perhaps there’s some “little engine that could” feeling, or perhaps it’s simply a matter of needing to show the big guys that the little guy can do it all by themselves. Whatever the reason, the “go it alone” sentiment is rapidly growing.

The question is, can it really be done?

Where would the money for development come from?

There are options of course. The province does have $2 billion in the bank from the recently signed Atlantic Accord deal and future revenues beyond that number, a portion of which could be funneled into the project. Newfoundland and Labrador Hydro has some funds available, not to mention borrowing power. More creative options like issuing bonds or some sort of income trust could also play a part in the financing and of course there is always the “Green” fund setup by the Feds.

Would it be worth the cost of development?

Of course it would. The revenues generated from a project of this sort could run into the hundreds of millions a year. Current estimates put Hydro Quebec revenues from the Upper Churchill at about $800 million a year. Although that project produces slightly more power than this new project, the ramifications are clear.

Beyond the direct financial value to be gained from a power project of this sort lie the secondary and perhaps even more valuable benefits, benefits that come with controlling so much low cost, renewable energy. Benefits like the ability to attract industry.

Currently, large industries in Ontario and throughout North America are suffering from a lack of power. Comments have been made to the effect:

“If they move here they won’t have that problem and it would take the strain off the power grid in the major centers”.

“Ontario won’t have to worry about brown outs if some of their factories move to Newfoundland and Labrador”

“Maybe if we can attract power hungry industries, the jobs might mean we can start seeing in-migration rather than out-migration for a change.”

Indeed, all of this sounds great, but is there still a catch?

Well, there may be one. Simply put, for Newfoundland and Labrador to develop the project on their own they must adopt a “If we build it they will come” attitude. The reality is that a return may not be seen on the investment until and unless these industries actually move into the province and start using the power.

The power produced from this project will far exceed anything the province itself can currently use. The original Upper Churchill hydro project has shown that Hydro Quebec will do everything possible to stop the province from moving power across it’s grid, unless they recieve the lions share of the revenues. It’s a sad reality, but a reality none the less.

Should the province go it alone?

Theoretically, it makes sense in the long run.

Financially, it’s possible.

Politically, the move could be a king maker.

Emotionally (for the public), it is a given. The public needs to begin feeling stronger and more in control their own destiny.

Never the less, the problem of geography still exists. The big question is whether or not the intestinal fortitude exists in the province to take the hit initially and wait out the returns. No matter how much the people of the province would wish it wasn’t so, the cruel fact is that geographically and philosophically the province will always be at odds with Quebec. This is a reality that is never going to change unless enough pressure is applied to Quebec by the feds and other power hungry interests.

Who knows, perhaps it takes a major move like this to put the province on a more even playing field with it’s neighbours. If the province of Newfoundland and Labrador, which already has ample resources, were to add excess power and a major industrial base to its portfolio, it might make for more beneficial dialog both federally and inter provincially down the road.

Only time and the final decision on the project in a few months will tell the tale. Until then, may the coffee and conversation flow faster than the Churchill River itself.