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Monday 20 August 2012

UPPER CHURCHILL CONTRACT: “Inherent Uncertainty” or Just Bafflegab?

Note: This item, written by your Uncle Gnarley scribe, was first published in the Telegram August 11, 2012 and is posted here for Uncle Gnarley readers.

Newfoundlanders and Labradorians have a right to feel a sense of betrayal, that an energy strategy, already bought and paid for, focusing on expiry of the Upper Churchill Contract in 2041, has been rejected by the Williams/Dunderdale Administrations. 

The following is a direct quote from Nalcor’s Submission, to the PUB, in defense of its Muskrat Falls strategy:
 "There is inherent uncertainty around guaranteeing the availability of supply from Churchill Falls in 2041 because it is difficult to determine the environmental and policy frameworks that will be in place 30+ years out. There are other issues surrounding the CF asset with respect to HQ, as Nalcor is not the sole shareholder of the Churchill Falls operation".  

Efforts to either break Hydro Quebec’s stranglehold on the Upper Churchill and develop the Lower Churchill, formed significant policy initiatives not just of the Moores and Peckford Administrations. 

Those of Brian Tobin and Roger Grimes had a different strategy but each attempted to limit risk to the NL treasury by engaging Hydro Quebec.

Notwithstanding the failures which ensued, energy policy, since 1974, has been pursued with the certain knowledge that the Upper Churchill Contract, in 2041, expires. 

Indeed, in another time, another Premier, indelibly linked with the Contract, might be heard to say: “It is not a case of ‘maybe’ or ’if’ or ‘possibly’.  The Contract ‘unquestionably’, ‘unreservedly’, ‘unconditionally’, ‘absolutely’ expires in 2041”.

Former Premier Danny Williams, in a 2007 Energy Paper, confirmed the position taken by previous Administrations, though he later found that second thoughts were later needed to bolster his Muskrat Falls initiative.   The Paper stated, on Page 3:

These goals were developed in the context of protecting our environment while
maximizing opportunities to the province from current and future developments,
including after 2041 when the province is in the position to receive the full
benefit from the Upper Churchill. (Underline added).

 I find the statement to be rather unequivocal, as to the matter of contract expiry.  I imagine most people would.  Hence, this must be one of those cases of, if the ‘story’ doesn’t fit, just change the script.
Given Nalcor’s current position then, with the approval of the Dunderdale Administration, we ought to ask:  what is this “inherent uncertainty” surrounding “environmental and policy frameworks”, to which Nalcor is referring? 

What has Ed Martin uncovered that advice sought from some of the top lawyers in Canada and Great Britain, working for Moores, Peckford, and possibly later Premiers, did not reveal? 
We need to know if these concerns are real or whether they are merely an attempt by Nalcor to obscure Muskrat Falls inside a shroud of mystery to which only Ed Martin is permitted the truth. 
In 1974, the Moores Government used $160 million of public money to pay Brinco, when it nationalized the developer of the Upper Churchill, in 1974.

 That is how the Province became the beneficial owner of two thirds of CFLco. It is the reason people have been led to believe, for nearly four decades, that the deep injustice perpetrated on the people of the Province, by Hydro Quebec, would finally be rectified. 
Today, we are forced to ask ourselves again, in light of the new Williams/Dunderdale script, whether we will receive a return on our water rights and on our substantial investment, when the contract ends in 2041. 

A strategy to bridge the gap between the proposed closure of the Holyrood generating station, in 2020, and availability of Upper Churchill power, in 2041, is all that is needed.
 It would permit the Province to avoid the high energy costs, huge debt and other risks associated with Muskrat Falls.

Indeed, one must ask, on what basis, should we not optimize the opportunity for repair of a historical grievance with Hydro Quebec and obtain a suitable return on our considerable investment in the Upper Churchill project?
Newfoundland’s energy destiny was set in 1974; it does not need to be re-set in 2012 with a risky $8-10 billion project, now, to cover a questionable, though a comparatively small energy deficit given the less risky alternatives available. 

How is it, that Nalcor can make a determination that NL ratepayers should suffer increases in power costs each year, for 50 years, to pay for Muskrat Falls, but energy policy in 2041 should not even be weighed against the risks, today?
There is no logic in Nalcor’s argument.

I would argue, that Nalcor, having adopted its Muskrat Falls strategy, has caused greater uncertainty than any that may be attached to the Upper Churchill contract.  
If Muskrat Falls proceeds now, we will be locked in to expensive Muskrat Falls power, under a 50 year “take or pay” contract, and unable to replace it with much cheaper Upper Churchill power.

If Muskrat Falls proceeds now, we will be playing into the hands of Hydro Quebec, because the high cost of that project will place the Province in a financial strait jacket and threaten our ability to make the right decisions on Upper Churchill power, when the time comes. 
No one has suggested that, in 2041, the hydro power will be free.  CFLco will have to treat Hydro-Quebec like the ‘minority’ shareholder that it is. Any Canadian corporation would legally be required to treat minority shareholders, fairly.  No more and no less!  While power from the Upper Churchill will not be free, it will be cheap. 
As for energy policy in 2041, the issue of cost will be a decision of the then democratically elected government.   

By then, Dunderdale, Kennedy and their cohorts will have been long run out of town.