UPPER CHURCHILL REPEAT? Not on My Watch

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ALTERNATIVE ENERGY FEATURE REPORT UPPER CHURCHILL REPEAT? Not on my watch. By Martin Connelly

ED MARTIN sees a very bright future for Newfoundland and Labrador. More specifi- cally, the CEO of Nalcor Energy, a provincial crown corporation power utility created in 2007, believes that future is inextricably tied to the proposed Lower Churchill hydroelectric project (in a good way). “The future of our province rests on energy,” he said. “And we’re going to have a tremendous amount for export. The Lower Churchill itself could take 3.2-million cars off the road. It co uld take [care of] 100 per cent of Atlantic Canada’s electricity emissions and 15 per cent of Canada’s 2020 target... If we get a good deal for Atlantic Canada, we’re going to do the deal.” The deal he’s talking about is one with Nova Scotia energy company Emera, one that will take power south from Labrador, across the Strait of Belle Isle, down the island of Newfoundland, and then across the Cabot Strait into Nova Scotia. Transmitting Lower Churchill power into Nova Scotia has been Nalcor’s stated goal since May of this year. In the interest of clarity: The Lower Churchill Project is a proposed hydroelectric development in Labrador, located down- stream from the existing 5,428 megawatt (MW) Churchill Falls generating station. The new project will consist of installations at Gull Island and Muskrat Falls on the Lower Churchill River (known as Mishtashipu to the local Innu) which, combined, are expected to produce 3,074 MW of electricity annually at an estimated capital cost of $6.5-billion. That $6.5-billion becomes $9-billion when you include the cost of the transmission infrastructure. While the potential of Gull Is- land and Muskrat Falls have been a given for nearly 50 years, everything else is up for de- bate. Blogger Ed Hollett (of the “Sir Robert Bond Papers”) contends that, based on vari- ous media reports and inflation, the cost, with

Photo: Paul Daly, pauldaly.net transmission, is more like $15-billion.

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site on the continent. Together, these two Newfoundland & Labrador Energy Warehouse sites are capable of producing 17-billion kilo- watt hours of environmentally clean, stable, and competitively priced electricity.” So, why hasn’t it been developed yet?

LIKE MANY large infrastructure projects, the two major issues at stake with the Lower Churchill are politics and economics. Within the Government of Newfoundland and Labrador, it has been a popular mantra for many years to state that no deal will be made with Hydro-Québec for development of the Lower Churchill without redress for 1969 (the year contract negotiations were finally con- cluded between Brinco and Hydro-Québec). ore NalcorSource: What went wrong in 1969? According to Philip Smith’s Brinco: The Story Of Churchill Falls, Québec was in the position of power and the Brinco corporation was in a position There are two routes the transmission it on March 19, 1964. In a 1997 speech, Pre- where they had to make a deal. Brinco had lines can go. They can go northwest and con- mier Brian Tobin had this to say: “The Na- spent a considerable amount of money and nect with the existing transmission link be- tional Energy Board of Canada has ranked time trying to develop the project; if it didn’t tween Churchill Falls and Hydro-Québec, or the… Gull Island site on the Lower Churchill proceed, the corporation would have gone they can go southeast, to the island of New- River in Labrador as the lowest cost unde- under. Add in Premier Smallwood’s insistence foundland, and continue south from there. veloped hydroelectric site on the North that the deal had to happen, and there was The Lower Churchill Project has been an American continent. Just a few miles down- very little the Brinco negotiators could do. eager gleam in political eyes since former Pre- stream, the Muskrat Falls site has been They were between Québec and a hard place, mier Joey Smallw ood first made mention of ranked as the fifth lowest cost hydroelectric and that, more than any other reason, is why Meeting industry’s medical needs both onshore and offshore

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they made the now-infamous deal that failed to include allowances for the rising price of electricity. In fact, as negotiated, the price paid by Hydro-Québec has actually been falling, at regular intervals, instead of rising with inflation. Developing the Lower Churchill will par- tially make up for the humble pie Newfound- land and Labrador has been forced to eat in the face of the 1969 deal. If that deal was an expression of the desire to bring the benefits of modern economies to Newfoundland, this project is an expression of Newfoundland and Labrador’s modern economy.

THELOWERCHURCHILLPROJECT has been a pillar of the current premier’s government platform since 2003, and it’s been a very central one since Danny Williams publicly opted to “go it alone” (i.e. sans Hydro- Québec) in 2006. Since then, Newfoundlan- ders and Labradorians have been living in an environment much akin to the years leading up to the Churchill Falls deal. There are public announcements, angry outbursts and, very likely, a whole lot of meetings behind closed doors. Top left, clockwise: proposed dam and powerhouse development (2,250 MW/year) for Gull Island; two dams and According to one schedule articulated in powerhouse development (824 MW) proposed for Muskrat Falls; Muskrat Falls, a natural 15 metre waterfall on the past, Nalcor should have broken ground the lower Churchill River, west of Happy Valley-Goose Bay, Labrador. Photo: Nalcor

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Lower Churchill The Opportunity for Canadian Suppliers (Total Opportunity $2.4-Billion)

Transmission Conductors Generation Most importantly, from the Province’s per- Wire And Cable Transmission Industrial Electrical Equipment spective, Nalcor is in a much better position Construction Equipment than Brinco ever was. While Brinco had to General Supplies finance operations by repeated stock offer- Cement And Concrete ings, Nalcor and the provincial government Travel & Accommodations can finance their operations with oil money. Fuel And Oil “If you look at our oil resources, which are Campsite & Operations generally increasing, but in time will go Steel away, it’s an obvious thing to take some of our revenues from there and pump them in Million Dollars (CDN) 100 200 300 400 500 600 700 to here, because this is the future. That’s our Source: Nalcor stated strategy,”M artin said. by now, but CEO Ed Martin puts a positive agreements have been made with the Innu The second ace in Nalcor’s hand is a green spin on the delay. He says there are five and are expected to be ratified before 2011, one. Electricity might be comparatively things that must be completed before the and engineering work shows that proposed cheap right now, but that is going to change, project can move into the next phase: engi- inter-provincial and subsea transmission lines and ‘Green’ energy will command a pre- neering and construction planning; an envi- are feasible. Work is also proceeding on ne- mium. “What is now a bit of a glut of power ronmental review; ratification of an impact gotiations with Emera (Nalcor’s publicly in the market is expected, in the course of the and benefits agreement with the Innu nation; traded Nova Scotia equivalent). decade, to become a relative scarcity,” said project financing; and, transmission access. “Obviously the governments of both sides Tim Curry, president of the Atlantica Center Sitting in a boardroom overlooking the St. will eventually be involved,” Martin said, for Energy in New Brunswick. Not only that, John’s harbour arterial, Martin checks them “but right now we’re in discussions with but with provinces, states and entire nations off one at a time. “We have come to a point Emera and those discussions are aimed making green energy goals, 3,000 MW could where we have enough engineering and at...what agreements will be made. I think go a long way towards scratching that itch. enough construction planning done that what we’re ensuring is that there are certain Marketing the Lower Churchill as ‘Green’ we’ve had an independent assessment tell us things Nova Scotia needs, there are certain does have its challenges because some critics that... we’re ready.” He further reports that things Newfoundland needs, and we’re struc- say it, well, isn’t. Nova Scotia and many the environmental assessment is underway turing an arrangement that meets both other governments limit the use of ‘Green’ to with public hearings planned for next year, needs.” hydro projects that allow what’s called “run

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of river” (which is to say, projects that don’t have a reservoir behind them as the Lower Churchill will). Martin, however, asserts this won’t be a problem. “We’ve obviously had discussions with the Nova Scotia government in addition to the Newfoundland government and they’re indicating that it will fit in the final analysis, so it will be classified as it’s required to be,” he said. “(Compare hydroelectricity to) replacing coal, replacing oil, even replacing natural gas. There’s absolutely no comparison. Hydro has no [greenhouse gas] emissions, practically, and these others do have tremendous amounts.”

CONNECTING THE Lower Churchill Project SOURCE to existing transmission lines in Québec re- ATLANTIC Your Source for mains the easiest way to get power to market Hydraulics, Rigging & Rubber Rigging & Rubber Sales – or, it would be but for the decades of polit- www.sourceatlantic.ca ical jockeying between Québec and New- and Services foundland and Labrador. Until this past spring, the Williams administration had put its efforts into trying to make a deal, offering Hydro-Québec an ownership stake in the project, and then, when that fell through, trying to negotiate a transmission agreement. The talks came to a head when the Régie de l’énergie (Québec’s energy review commission) ruled that Hydro-Québec was within its rights when it said there was not enough capacity on the existing grid for Lower Churchill power. Newfoundland and Labrador Premier Danny Williams called the ruling “blatantly incorrect and unjust.” “This decision took my breath away,” he said. Both the provincial government and Nal- cor issued statements that came close to ac- cusing Hydro-Québec of obstructionist tactics, which are illegal under the (U.S.) Fed- eral Energy Regulatory Commission (FERC). The FERC requires that utilities provide access to their grids to energy producers in an open-access, non-discriminatory manner. The requirements are known as the Open Access Industrial Hose & Fittings Transmission Tariff (OATT). Hydro-Québec has been complying with the OATT since Rigging Supplies & Hardware May of 1997 to facilitate cross border trade, though it should be noted that the FERC has no jurisdiction in Canada. Full Range of Hydraulic Products “While there has been much detailed dis- cussion around technicalities and legalities, it Custom Sling Fabrication all boils down to a very simple question: Does Hydro-Québec provide fair and reasonable access to its transmission lines as it is sup- Sling Inspection, Testing & Repair posed to do under its own tariff rules which they’ve adopted from the United States? We 24/7 Emergency After Hours Services strongly believe that the evidence is to the contrary,” Martin said. On the other hand, it’s not out of the ques- Saint John Branch tion that Québec was playing by the book. “[The decision] made sense in the sense 331 Chesley Drive | Telephone: (506) 648-2101

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that...transmission lines get The first part consists of a link from Labrador to the is- built typically to meet land of Newfoundland, known as the Labrador-Island known service demands,” Transmission Link. The proposed 1,100 kilometre High said Curry. (It should be Voltage direct current link would extend from Gull Is- noted that Newfoundland land to Newfoundland’s Northern Peninsula, then has been transmitting a across the island, terminating in Holyrood where the small amount of power from power it carried would replace the existing thermal gen- Churchill Falls to U.S. mar- erating station. At peak, the Holyrood station burns kets through Québec, in a 18,000 barrels of oil per day and generates 500 MW of process known as wheeling, electricity annually. According to Martin, the transmis- since 2009 under a Trans- sion link would lead to a zero emission energy climate mission Service Agreement in Newfoundland and Labrador, which means that the with Hydro- Québec.) Lower Churchill Project would replace close to 738 The CBC reported that MW of installed generating capacity province-wide, ac- Hydro-Québec asked for $3- counting for more than a quarter of the Lower billion in transmission up- Churchill Project’s projected output. grades. Martin went on the The second, and very crucial, piece of the Maritime record saying Nalcor would route would be an undersea cable between Port aux “Shameful.” That’s how pay for “reasonable upgrades” to Hydro-Québec’s Basques, Newfoundland and North Sydney, Nova Sco- Newfoundland and Labrador transmission lines along with annual tariffs between tia, thereby connecting Lower Churchill power to the Premier Danny Williams (foreground) described $75-million to $200-million (depending on how much Nova Scotia grid. Québec’s opposition to power went through Québec). Hydro-Québec, however, The Maritime Route (formerly known as the “Anglo federal support of a is silent: officials declined to be interviewed for this Saxon Route”) has been technically doable since it was proposed subsea power story, and have been consistently reticent with other first considered in 1964, but it was deemed prohibi- cable linking Newfoundland and Nova Scotia. Nalcor media as well. tively expensive. In 1978, Vic Young, president of New- Energy CEO Ed Martin is foundland and Labrador Hydro at the time, said: “The shown in the background. PREMIER WILLIAMS’ response was to push for a so- 77-mile cable across the Cabot Strait is an extremely Photo: Paul Daly, pauldaly.net lution that excluded Québec: the Maritime Route. In its poor prospect. Although a study two years ago stated it current iteration, the Maritime route exists in two parts. was [doable], its capital and maintenance costs would

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be enormous. The electricity delivered would In June, the provinces of Newfoundland generation... Emera is pleased to be involved cost about twice what it would if brought and Labrador and Nova Scotia filed a joint in these discussions and we will continue to down overland.” proposal to the federal government request- work with all stakeholders in the region to- Today, the economics of the Maritime ing $375-million towards the cost of the un- wards further energy development,” he said, Route look a bit better. An SNC-Lavalin dersea link. Québec filed a letter opposing via email. study published December 2009 estimated the grant, on the basis that federal subsidies Emera is also considering plans to up- the inter-tie would cost from $800-million to could distort the price and market for elec- grade the Nova Scotia–New Brunswick $1.2-billion. The cost, while considerable, is tricity. Williams called the move “shameful.” transmission link, a move which would cre- less than the $3-billion reportedly requested There’s been no official word on whether ate the opportunity to export excess power by Hydro-Québec. There’s also a substantial or not the federal government will approve to the rest of the Maritimes and New Eng- amount of pr ecedent. the application, and from the way the two land. It’s a definite possibility given that Ban- Ed Martin points to a map of undersea ca- provinces are talking, it appears that they are gor Hydro Electric is a wholly-owned bles crisscrossing the North and Baltic seas. determined to make this project happen - subsidiary of Emera. “As in many things, the Europeans are way with or without the federal government’s ahead of us...What we’re proposing is less help. Indeed, Martin reports that confiden- ALL OPTIMISM ASIDE, there are still hun- length and possibly about the same capacity tial discussions between Nalcor and Emera dreds of ways this project could falter – all as these routes, so technically it’s not an are continuing at a promising pace, though of the ways it has in the past and many more issue.” he would not say if a Power Purchase Agree- besides. But, if there’s one lesson to be Not only that, but the Maritime Route is ment (PPA) is part of those negotiations. If learned from Philip Smith’s Brinco account, friendly. Nalcor has officially been exploring one is signed, it’ll be the green light the it’s that government and a sense of urgency the possibility with Emera and Emera sub- Lower Churchill Project has been waiting do not help the deal making progress. So it’s sidiary Nova Scotia Power Inc. since the for. refreshing to hear that even with all his en- three parties signed a Memorand um of Un- Emera CEO Chris Huskilson was simi- thusiasm for the project, Nalcor’s Ed Martin derstanding (MOU) in January of 2008. “I larly tightlipped on whether talks are headed isn’t rushing into any decisions. “All I can will say we have the right attitude, both par- towards a PPA, but he does corroborate the absolutely commit you to is that whatever ties have the right attitude because we’re in a positive direction they’ve taken. “We believe decision is made will have a tremendous win-win mindset... and that mindset is totally that new transmission capacity… benefits amount of logic, commercial sensibility, and different from the mindset we’ve encoun- everyone in our region. It’s critical to future reason behind it,” he said. tered elsewhere,” said Martin. energy development, including renewable We’ll see. | NRM

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