Lower Churchill Development Decision is a No Brainer

Over the past couple of days I've had an opportunity to reflect on the issue of who should develop the Lower Churchill hydro project in Labrador. I've listened to the open line programs, chatted with friends and aquaintences and tossed the idea around the old noggin for a while. After all of this, I have come to one and only one conclusion.

Question: Should the Province of Newfoundland and Labrador develop the Lower Churchill itself?

Answer: How in the name of God Almighty can the government of Newfoundland and Labrador even consider doing anything except going it alone on this?

It's a no brainer, unfortuately my brain takes a little while to absorb the facts or I would have had the answer the first time someone asked my opinion, rather than the forty-first.

The province is in desperate need of power to fuel industrial growth. The entire province, especially the Labrador portion, is arguably one of the richest sources of mineral deposits on the continent, if not the planet. Currently most of that material is being exported for processing. Why is this happening? The answer is simple. There is no available source of inexpensive and abundant power in the province that would enable smelters to be built and efficiently run.

I say “available source” because there is indeed abundant power in the area and there always has been. Never the less, it is not available for the development of the province. Instead it is being exported and used to fuel economic development in Quebec and beyond.

Can the province afford to make the same mistake with the Lower Churchill as it did with the Upper? Forget for a moment making the type of bad financial deal that was made in the past. The more critical issue if the province afford to give up the potential for industrial development that would come from controlling this much power?

According to their web site, Newfoundland and Labrador Hydro currently has a generating capacity of approximately 7,289 megawatts. This is used to supply the province’s current needs but leaves little for growth. Consider as well that the Lower Churchill project has the ability to produce 2,824 megawatts or approximately an added 40% of the capacity currently in place.

Even though development estimates on the project run as high as $9 billion dollars, this could be a bargain at the price.

It has been estimated that the Upper Churchill plant has generated over $24 billion in profits since coming on line in 1972 (approximately 96% of this revenues has gone to Quebec Hydro, 3-4 % to NL). The value of clean power continues to rise and it is a revenue stream that will never stop. Although the Lower Churchill is only about half the size of the upper project, the numbers are still staggering and once the initial outlay has been recovered, the money would flow faster than the river itself.

Financing should not even be an issue in the current political environment. The provincial government is in better financial shape than it was in the 1970s, when the original deal was signed, and it would not be a stretch to expect the federal government to cost share the project in a big way.

Canada has extremely large and difficult commitments to meet with respect to Kyoto. The Lower Churchill project alone would allow the Country to meet nearly 10% of this requirement. This doesn’t even take into account the Kyoto benefits that could be gained by shutting down the province’s Holyrood oil fired generating facility.

Currently the Holyrood generating station burns an estimated 6,000 barrels of heavy fuel in each of its three units, for a total of 18,000 barrels a day, in order to generate a mere 490 megawatts of power. In addition to helping Ottawa meet Kyoto commitments, how much money could be saved by Newfoundland and Labrador Hydro if they did not have to purchase approximately 6.5 million barrels of fuel a year at today’s prices?

The province, in conjunction with Newfoundland and Labrador Hydro is now considering options for the development, when in reality what they should do is throw out all the proposals and begin the task of developing the most cost effective and timely plan to develop the project themselves.

Not only should the project be developed by the province, the power should not be sold into the North American market at all. The timeline to develop the project would see first power flow in 2014. This gives the province a decade to market the power potential to energy hungry industries around the globe. Industries that will jump at the chance to have access to clean, stable and reasonably priced power.

The potential is staggering in proportion. No longer would ore be pulled from the earth only to be processed elsewhere. The smelters would come to us.

No longer would raw materials of any kind need to leave the province. The factories and mills would come to us.

Perhaps most importantly, no longer would our people need to migrate out of the province in order to find work. The work would come to us.

Retaining control of this power source is not something that would be nice to do. It is something that must be done.

If the project is managed correctly, within a year or two of first power, the province of Newfoundland and Labrador could see itself in a position where it is experiencing massive industrial growth.

Within a few years of first power, the province could see itself experiencing in-migration rather than out-migration.

Within a decade of first power the province could see itself with a booming oil economy that, although large, is only a small percentage of its revenues, rather than its life’s blood.

Within three decades of first power the Upper Churchill contract would expire and the staggering revenues from that mega project would begin to flow to it’s rightful owners.

In less than 50 years, less than the time the province has been a part of Canada, Newfoundland and Labrador could experience a population explosion. Power brings industry, industry brings jobs, jobs bring wealth and wealth brings people.
The migration of 1 or 2 million people into a province with the land mass of Newfoundland and Labrador would not be a problem, in fact it would be a god send.

Finally, add to all of the benefits outlined above the biggest and perhaps ultimate benefit of all to the province. Massive in-migration would eventually equate to additional seats on Parliament Hill and with those would naturally come an entirely new kind of power.