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Newfoundland and Labrador Premier Danny Williams, left, and N.S. Premier Darrell Dexter announced terms of a deal to develop hydroelectric power in Labrador and transmit it at least as far as Nova Scotia. ((CBC))

The premiers of Newfoundland and Labrador and Nova Scotia on Thursday announced a $6.2-billion deal to develop the Lower Churchill hydroelectric megaproject, bypassing a historical roadblock at the Quebec border.

"It's a huge milestone," Premier Danny Williams told reporters in St. John's as he and Nova Scotia Premier Darrell Dexter revealed a complex deal that will generate power on the Churchill River and supply energy to both provinces — and possibly beyond.

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Energy companies in Newfoundland and Labrador and Nova Scotia will pay at least $6.2 billion to develop the Lower Churchill power project, supplying power to both provinces and potentially beyond. ((CBC))

"For me this is absolutely huge, [as well as] for Newfoundlanders and Labradorians," Williams told reporters.

"This project is a go. …As a region, we're making a statement here to the rest of North America and indeed the rest of the world."

The federal government has not yet decided on an application to defray the cost of the underwater link and a separate request for a loan guarantee. Williams and Dexter said, however, that they are confident in obtaining favour from Ottawa.

Lower Churchill project

  • Development cost: $6.2 billion
  • Power: 824 megawatts
  • Jobs: 2,700 at peak; 120 permanently
  • Share of assets: Nalcor 51 per cent, Emera 49 per cent
  • Contract: 35 years
  • Requiring: Ratification of Innu Nation land claim
  • Sought: Federal loan guarantee; $375 million toward subsea link
  • What Nalcor will pay for subsea link in 2045: $1

The deal involves the participation of the Innu Nation, which has yet to ratify a separate land-claim deal that includes Muskrat Falls. Labrador's Innu stand to collect about five per cent of royalties, as well as have first crack at local jobs.

Williams took delight in noting how the deal has come together with no participation from Quebec, which has steadily refused to allow Newfoundland and Labrador to wheel Lower Churchill power across its borders to markets in Ontario or the U.S.

"Today we sign an agreement on our terms with another great partner, [Nova Scotia's] Emera, that is free of the geographic stranglehold which Quebec has had for far too long on us," Williams later told a packed ballroom at a hotel in downtown St. John's.

35-year deal

The premiers agreed on a 35-year partnership involving Nalcor, Newfoundland and Labrador's Crown-owned energy corporation, and Halifax-based Emera Inc., parent company of Nova Scotia Power.

At its peak, about 2,700 people are expected to work on the project, which is expected to deliver first power by 2016, and full power the next year. Nalcor CEO Ed Martin said a contract for engineering and construction management is expected to be let in December.

The deal effectively allows Nalcor to generate energy for Newfoundland and sell surplus energy to new markets, and provides a consistent source of energy to Emera, which already has commercial stakes in the Maritimes and the northeastern U.S.

Both parties stand to profit from potential sales to other markets.

The deal will see a 824-megawatt power plant built at Muskrat Falls in central Labrador, with a supply of about 4.9 terawatt hours per year.

Emera will receive about 20 per cent of that energy for itself, and in return is paying for the construction of the underwater link. Newfoundland and Labrador, which is reserving 40 per cent of the power for its own use, will raise $4.4 billion to pay for its share.

Williams said financing the megaproject is possible now because the province's debt has been reduced by more than $3 billion since his Progressive Conservatives took office in 2003.

Larger site left undeveloped

The deal, though, leaves undeveloped the 2,200-megawatt potential of the Gull Island site on the Churchill River, which has been on blueprints — and a dream of every Newfoundland and Labrador premier — since the 1970s.

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Darrell Dexter: 'This is our CPR.' ((CBC))

Even though only the smaller component of the megaproject is now being built, Williams described it as monumental, and the fact that it is bypassing Quebec is of historic significance.

He said residents of his province "can let go" of decades of ill feeling over a 65-year contract signed with Quebec in 1969 on the Upper Churchill megaproject, in which Quebec reaps the vast majority of revenues.

Under the new deal, Nalcor will pay for the development of Muskrat Falls and the companies would jointly develop subsea power lines from Labrador to Newfoundland.

Power will flow in Newfoundland down the Northern Peninsula and along a path toward eastern Newfoundland, bypassing Gros Morne National Park. Williams had once wanted to run power lines through the area, a UNESCO World Heritage Site, but changed his mind after public opposition to the proposal.

Emera will pay for and effectively own the maritime link, which will carry about one terawatt hour per year from southwestern Newfoundland to Nova Scotia. The link will be made at Lingan, N.S., and constitutes about eight per cent of Nova Scotia's power supply.

'It builds the country'

Dexter said the terms of the deal are of epochal significance.

"This is our CPR," Dexter told reporters.

"We are building the nation. This strengthens us as a region, but ultimately, in so many categories, it builds the country."

Although Muskrat Falls is a more expensive option, per kilowatt hour, than the whole of the proposed Lower Churchill project, both Williams and Dexter touted the plan as providing decades of clean energy at stable prices.

"This is a historic day for Nova Scotia, and all of Atlantic Canada," Dexter said. "Through this partnership, Nova Scotia is taking a major step forward as an international leader in renewable energy."

Under the terms of the deal, Emera will invest $1.2 billion in exchange for otherwise free access to 20 per cent of the electricity generated by the project.

Dexter plans to meet with New Brunswick Premier David Alward to discuss how the agreement would enable New Brunswick and Nova Scotia to strengthen the electricity system in the Maritimes and create jobs in Atlantic Canada.

Further details of the deal are being negotiated between Nova Scotia Power and Nalcor, and will be subject to public review and approval by the Nova Scotia Utility and Review Board, said the statement from Nova Scotia.