Newfoundland and Labrador Premier Danny Williams said Tuesday the Innu Nation's demands for compensation could scuttle the Lower Churchill hydroelectric project.

Williams said if the demands — which include reparations for hunting grounds and travel routes they lost due to flooding for the original Upper Churchill project 40 years ago — are too steep, the deal could be off.

"If in fact a deal — a Lower Churchill development — is contingent upon redress, then that may be a condition that we just cannot fulfil, and therefore it will be off the table," he told reporters.

Last week, Peter Penashue, the deputy grand chief of the Innu Nation, told CBC Radio that before they would sign off on any deal for the Lower Churchill the Innu wanted compensation for the Upper Churchill project, as well as a land claims agreement, and a benefits agreement in place for the Lower Churchill project.

Williams said he doesn't like ultimatums, especially when they are tied to multibillion-dollar developments, and are made on the airwaves instead of at the bargaining table.

"Peter Penashue and his group should treat us with respect, as we treat them with respect," he said.

The provincial government hasn't made any money off the original Churchill deal either, so it doesn't make sense for the government to compensate the Innu, the premier said.

Without an Innu deal there can be no Lower Churchill deal, Williams said, adding that Penashue's decision to make statements on national radio undermines the negotiations with the province.

The provincial government and the Innu have been trying to work out a deal on the Lower Churchill hydroelectric project for more than two years.

The Innu Nation is the political organization that represents 2,000 Innu, most of whom live in Sheshatshiu, in central Labrador, and Natuashish, on Labrador's northern coast.