Nfld. may go solo on huge hydro project

Dene Moore
Globe and Mail
09-Aug-2005

ST. JOHN'S, NFLD. - With a mid-summer heat wave pushing North America's electrical demand to record highs, Newfoundland Premier Danny Williams says his province is considering going ahead on its own to develop a massive hydroelectric project in Labrador.

He said the time is right for the Lower Churchill development, and that an in-house project will be among four possible proposals under close consideration in the coming months.

"Our financial situation is starting to improve," Mr. Williams said at a news conference yesterday to announce which of 25 proposals received earlier this year will proceed to an assessment phase.

With $2-billion from the federal government under a renegotiated offshore accord, he said the province's financial capability has improved greatly. "We're in a position to seriously consider it," Mr. Williams told reporters.

The price of energy is another important factor.

The completed development, which the province hopes to have running by 2014, will produce 2,824 megawatts of electricity from Gull Island and Muskrat Falls on the Churchill River - enough to power 1.4 million households a year.

Newfoundland and Quebec have been negotiating a deal on and off for more than two decades, and in November, 2002, the former Liberal provincial government had billboards printed and a public television address prepared to announce a $4-billion agreement.

But the deal was derailed by opposition Conservatives, including Mr. Williams, and public protests.

One of the major hurdles is public outrage over Churchill Falls, the previous hydro project developed with Quebec. Completed in 1972, Churchill Falls is one of the largest power installations in the world. Quebec has reaped nearly $1-billion in profit while Newfoundland has gained little. The agreement doesn't expire until 2041.

With a Lower Churchill deal still far in the distance, at least one municipal group has formally demanded any new deal redress the wrongs of Churchill Falls. The Combined Councils of Labrador also seeks priority for jobs and lower utility costs.

However, a deal that involves Quebec still is a strong possibility.

Among the four proposals to be considered by Newfoundland and Labrador Hydro-Electric Corp. over the next six to eight months is a joint proposal by Hydro Quebec, Ontario Energy Financing Co. and Montreal-based SNC Lavalin Group Inc. Proposals by Calgary-based TransCanada Corp. and a consortium comprising Macquarie North America Ltd., the Innu Development Partnership, Peter Kiewit Sons, and Innu Kiewit Constructors are also under consideration.

"We're at the very early stages of this process," said Ed Martin, president of the Crown corporation. "We are far from committing to commercial arrangements with anyone, just yet."

Still, Newfoundland hopes to start negotiations this month with the Innu of Labrador to resolve land claim issues outstanding that could affect any future development.

A 2003 blackout in Ontario and eight U.S. states made North American electrical capacity a priority for governments, and Ottawa has expressed interest in an east-west power grid.

Both Ontario and Quebec have warned of looming power shortages, and Ontario had two days of brownouts last week as temperatures soared to 40 C. Demand is also urgent in the northeastern U.S. New York is setting records weekly as temperatures soar and residents try to cool off.

"Our timing is ideal. It's kind of an endorsement of this project that there's such demand," said Dean MacDonald, chairman of the board of Newfoundland and Labrador Hydro. "All of them are in dire need of that energy."