Don’t sleep on the Churchill Falls talks

OTTAWA—While Ottawa is awash in a Liberal government uncertain of China's influence in our democratic processes and a Conservative leader trying to escape a story about three of his MPs breaking bread with an extremist German parliamentarian, something fascinating is happening out East. On Feb. 24, Quebec Premier François Legault travelled to St. John’s to meet with Newfoundland and Labrador Premier Andrew Furey to discuss the future of the Churchill Falls contract. Ah, Churchill Falls. Within minutes of meeting someone from Newfoundland and Labrador, anyone who is not from the Rock is likely to be told the tale of Churchill as if it were part of the first date, tell-me-about-yourself question. Churchill Falls is pretty much part of the creation myth for everyone from home. It basically can be summed up like this: the Churchill Falls hydroelectric project was supposed be Newfoundland and Labrador’s first and greatest golden goose, providing golden eggs for us all. Instead, we signed a deal where Quebec got the eggs, and we got the cartons they came in. Or in more direct parlance, “we were f’ing screwed.” True or not, that tagline has propelled us and influenced our politics for decades. It is important to understand why the pain feels real to Newfoundlanders and Labradorians. As reported recently by the Canadian Press, the 1969 agreement on Churchill Falls between the two provinces allows Hydro-Quebec to purchase the majority of the electricity in Labrador and therefore reap most of the profits from its resale. In 2019, the arrangement had meant nearly $28-billion in profits for Quebec, compared to $2-billion for Newfoundland and Labrador. While the current deal does not expire until 2041, Quebec and Newfoundland and Labrador are exploring their options now. Why? From Legault’s perspective, their energy surplus is expected to evaporate in 2026, according to his crown utility Hydro-Québec. Churchill Falls power equals about 15 per cent of Quebec’s electricity needs. You can’t slap up new hydro development projects overnight. They are likely more difficult to build given the political complications. And buyers of your product, like the good people of New York state, won’t make future bets on energy purchases if they are not there. For Newfoundland and Labrador, who for the first time find themselves being forcefully courted by Quebec, reaping more value from Churchill Falls sooner rather than later has obvious impacts in a province that has growing health-care service demands, an aging population, and an uncertain future for our lucrative oil industry. It could make the difference between regularly flirting with bankruptcy and sustainability. Rightly, Premier Furey has managed expectations around what is actually happening with Quebec right now, characterizing his recent meetings with Legault as a “discussion,” not a negotiation. He has seen that overenthusiastic chest thumping and bellowing about how one agreement will change the face of the province usually ends up biting a premier in the arse. Ask former Newfoundland and Labrador premier Brian Peckford how his line about the “have-not being no more” in discussing our resource future played out? Furey also knows if he gets Churchill Falls wrong, he will be tagged with blowing an opportunity. This story is one to watch. And not just because it is rare for a Quebec premier to travel to Newfoundland and Labrador to ask for something, or to acknowledge, as Legault did—to his credit—the one-sided nature of the original deal and the real pain Newfoundlanders and Labradorians felt on losing out. What happens here influences everything from inter-provincial relations, to the federal treasury, to the 2030 climate reductions emission plan, and beyond. Never mind numerous issues of affordability as well as the complexity of major renewable resource development in Canada. After Legault and Furey met last week, they agreed to put together a team to talk about the infamous contract and what happens when it ends in 2041. We should all be paying close attention. Tim Powers is chairman of Summa Strategies and managing director of Abacus Data. He is a former adviser to Conservative political leaders. The Hill Times