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Churchill Falls: 'The biggest giveaway in history'

From rushing rivers deep in Canada's wilderness comes the electricity that keeps our cities humming. As a renewable, emissions-free source of energy, hydroelectricity is "green," but flooding from hydroelectric dams has sometimes devastated traditional aboriginal livelihoods. Ranging from a single tidal turbine to Niagara Falls to a dam carved from a mountain, Canada's hydro projects provide 60 per cent of this country's power.

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With the world's largest hydroelectric generating capability, Churchill Falls should be a source of pride for Newfoundlanders. But even as power starts flowing from the last of the plant's 11 generators, the headache begins. To send electricity from the remote Labrador location to hungry U.S. markets, Newfoundland negotiated a deal with Hydro-Québec to carry the power south. As the CBC reports, the price of power has since surged, spelling a big profit for Quebec -- and little for Newfoundland.

After construction began at Churchill Falls in 1967, Hydro-Québec was the only utility to consider investing in what it viewed as a risky venture. In return for Hydro-Québec's investment, Newfoundland agreed to sell its power to Quebec at a fixed price for 65 years. Then the price of energy skyrocketed. Now Quebec resells Newfoundland's power at high market rates while buying it cheap. "It's the biggest giveaway in history," says Newfoundland Premier Frank Moores, vowing to reopen the contract. 
. The Churchill Falls hydroelectric project was a dream of longtime Newfoundland premier Joey Smallwood. He first laid eyes on the falls (then named Grand Falls or Hamilton Falls) in 1949, shortly after Newfoundland became Canada's 10th province.

. Smallwood believed development of the falls would provide economic stability for Newfoundland. In 1953 the province, along with British investors, formed a consortium called the British Newfoundland Corporation, or Brinco. It probed the region's hydroelectric and mineral potential.
. In 1965 the falls and their river were renamed Churchill Falls and the Churchill River. The change was in honour of former British prime minister Winston Churchill, who died that year.

. The falls were located in a part of Labrador that was disputed territory. Despite a 1927 ruling from the Imperial Privy Council on the boundary issue, Quebec still felt the region rightfully belonged to it.
. Smallwood retained a Swedish engineering firm to probe the possibility of creating an alternate route. The grid would cross the water to Newfoundland, along the island and across the Cabot Strait to New Brunswick and on to the United States. It proved too expensive.

. The federal government had the power to declare a corridor through Quebec for Newfoundland's power. But given the intended recipients - Americans - and the separatist sentiment in Quebec, Canada opted to stay out of the dispute.
. Newfoundland took Quebec to court over the issue. In 1984 the Supreme Court of Canada ruled that Newfoundland could not back out of the agreement.

. In 1994 Premier Clyde Wells of Newfoundland considered privatizing the provincially owned Newfoundland and Labrador Hydro. According to Maclean's magazine, Wells believed a private company might be successful in arguing that the contract with Hydro-Québec be scrapped. Privatization never happened.

. In 1996 Maclean's reported that Newfoundland received about $20 million annually by selling its power to Hydro-Québec. By exporting the same power to U.S. markets, Quebec earned about $800 million per year.
. The price of power in the agreement is not indexed to inflation. In 1976 Hydro-Québec was paying 0.3 cents per kilowatt hour for Churchill Falls power; in 1996 the rate was 0.27 cents. In 2016 it will drop again to 0.2 cents per kilowatt hour.

. In 1996, as premier Brian Tobin sought to renegotiate the agreement, even a former minister in the Quebec legislature seemed to think the deal was unfair. "The [agreement] had gone from 30 to 65 years. I couldn't believe it," Eric Kierens told CBC Radio's Peter Gzowski. "People don't take risks more than 20 or 30 years even on long term things ... That's how insane this thing was."
. The contract expires in 2041.
Medium: Television
Program: CBC Television News
Broadcast Date: Oct. 13, 1974
Guest(s): Frank Moores
Reporter: Bill Mitchell
Duration: 3:00

Last updated: December 5, 2012

Page consulted on November 7, 2014

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