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Quebec re-enrages the Rock

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The summer of 1969 was a time of Woodstock, hippies and love-ins. But mention that date to almost anyone in Newfoundland and Labrador and you'll be reminded it was the year the contract was signed to build Labrador's Churchill Falls hydroelectric project -- the infamous deal that has been enriching neighbouring Quebec and enraging people on the Rock ever since.

Hydro-Québec reopened that old wound this week, announcing it has filed a lawsuit in Quebec Superior Court seeking to reassert its right to access "practically all of the power produced" at Churchill Falls for another 28 years, until the contract expires in 2041.

The suit threatens to derail Newfoundland's new and much ballyhooed generation project downstream at Muskrat Falls, by limiting the province's ability to control the flow of water and, in turn, the amount of power generated there and at the existing Churchill Falls site.

Worse, it was one of three potential roadblocks to the $7.7-billion project thrown up this week.

Nova Scotia is footing a fifth of the cost of Muskrat Falls in exchange for 20 per cent of its output. The power is to be delivered via a 180-kilometre undersea transmission line from Newfoundland to Cape Breton, which accounts for $1.5 billion of the project's bottom line.

To fund construction of the so-called Maritime Link, Nova Scotia's privately owned utility, Emera Inc., plans to raise power rates. That's a sore point in a province already saddled with higher electrical rates than most of the country.

The Utility and Review Board, Nova Scotia's regulatory body, approved the maritime link this week, but with an important condition -- to cushion the blow to consumers, Emera must convince its Newfoundland partner, Nalcor, or some other supplier to guarantee access to an additional block of power at market rates.

While the ruling does not appear to be a deal-breaker, it forces the two provinces to reopen part of their agreement. And Newfoundland is making no secret of its reluctance to sign away power it might need in the future.

As misery loves company, a group representing native peoples in southern Labrador also weighed in. It will ask a judge to overturn the federal permit allowing Nalcor to dam the river at Muskrat Falls, claiming more consultation is needed on the environmental impact and fishing rights.

The latest hurdles have revived doubts about the timing and viability of Muskrat Falls, and emboldened the megaproject's many critics.

Former Newfoundland premier Brian Peckford renewed his call for an independent review. Tom Adams, a Toronto-based energy consultant who has dubbed the project "Muskrat Folly," warned in the pages of the National Post it would be "madness" to keep pouring money into construction (Nalcor is spending an estimated $500,000 a day at the site) until Hydro-Québec's court action and the Emera deal are settled.

Adams and other naysayers worry Newfoundland is making the same mistake its first post-Confederation premier, Joey Smallwood, made in the 1960s, when he pushed ahead with Churchill Falls before he had a final contract in place. He was forced to sign the disastrous deal that had earned Hydro-Québec $19 billion as of 2007, compared to $1 billion for Newfoundland.

Muskrat Falls will produce about 800 megawatts of power. That's a fraction of the 5,500 megawatts Churchill Falls has been churning out since 1971, but the new project is a symbol of a different kind of power -- it's a bid to right an historic wrong and to assert Newfoundland's new-found, have-province status.

The latest dispute with Hydro-Québec has been simmering for several years. Newfoundland (which controls the Churchill Falls generating plant but not the Quebec transmission lines that deliver the power to market) has taken steps to manage the river's flow and plans to restrict Quebec's access to power when the Smallwood deal is automatically renewed in 2016.

Newfoundland and Labrador Premier Kathy Dunderdale, who needs a victory at Muskrat Falls to escape predecessor Danny Williams' long shadow, calls the lawsuit "desperate" and "deplorable" and has vowed Hydro-Québec will no longer "set the agenda" for her province's power development.

She insists Newfoundland has legal opinions supporting its position, but refuses to make them public. A group of St. John's lawyers, meanwhile, has been warning for months the province is on shaky ground on the water-rights issue.

The legal dispute may well wind up before the Supreme Court of Canada and could take years to resolve. In the meantime, arrangements are being made for Dunderdale, Quebec Premier Pauline Marois and Nova Scotia Premier Darrell Dexter to meet this fall to discuss the latest skirmish in the war over Churchill Falls.

Whether they can work out a compromise in the Hydro-Québec dispute -- or, perhaps, lay the groundwork for regional co-operation on energy matters -- remains to be seen. No matter what comes of the summit, no one in Newfoundland and Labrador is likely to remember the summer of 2013 as the Summer of Love.

 

Dean Jobb, associate director of the school of journalism at the University of King's College in Halifax, is the Winnipeg Free Press East Coast correspondent.

Republished from the Winnipeg Free Press print edition July 27, 2013 A15

History

Updated on Monday, July 29, 2013 at 9:56 AM CDT: Corrects spelling of Hydro-Québec

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