Muskrat Falls on Churchill River in central Labrador. A hydroelectric plan that is close to being finalized would include construction of a subsea link from Labrador Churchill to the island of Newfoundland, and then to Nova Scotia. (CBC)

Premier Danny Williams says Newfoundland and Labrador is close to finalizing a deal to develop a Lower Churchill hydroelectric project that won't send energy through Quebec.

Williams told the annual general meeting of the provincial Progressive Conservative Party on Saturday that a partnership is being negotiated with Emera Energy and Nova Scotia to develop the project in two phases, "without having to beg Quebec for a piece of the pie."

Williams said if a deal is struck, the 824-megawatt Muskrat Falls area will be developed first, followed by a Gull Island area development later.

"If there's anything that puts a smile on my face, that does every time," said Williams.

The plan would also include construction of a subsea link from Labrador Churchill to the Island of Newfoundland, and then from the island to Nova Scotia.

"It's not a done deal, but it's a project that would replace the 'expensive and dirty' power from the Holyrood generating station and take Quebec out of the picture," said Williams.

The Holyrood station burns oil to create electricity. The Newfoundland and Labrador government has said before that it would like to close it once it finds an alternative source of energy for the province.

Goals for Lower Churchill set

In 2006, Williams announced the province would develop the $6.5-billion Lower Churchill project, and it had hope to decide on feasibility in 2009, with the first power drawn as early as 2015.

However, since then, Williams and his government have had a series of setbacks.

Last May, Quebec's Régie de l'énergie dismissed Newfoundland and Labrador's complaint that Hydro-Québec was not allowing fair and open access to its transmission lines. A week later, the Quebec Court of Appeal dismissed Newfoundland and Labrador's request for another hearing.

In June, Williams said the province was examining the feasibility of a sub-sea alternative route that would move power through Nova Scotia and New Brunswick.

"This is an evolving circumstance because everything is still tied into environmental approval, finalization of the aboriginal piece. But from an economic perspective, we are in a situation where we have enough information to really sit down and talk with any industrial developer at any point in time," Williams said in the legislature.

Speaking to reporters later, Williams said the government is rolling with the punches.

"As we hit certain obstacles, we shift, and we move and we move forward. So we go one step at a time," Williams said.

Development of the Lower Churchill has been a goal of the Newfoundland and Labrador government since the 1970s, although engineering and other planning for the megaproject has been intense in the last five years.