Fri. Feb 23rd, 2024

Gull Island Dam and the agreement that never saw the light of day

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Roger Grimes, Prime Minister of Newfoundland and Labrador between 2001 and 2003, almost succeeded in signing an agreement with Quebec on the Gull Island hydroelectric project.

  • Patrick Butler (View profile)Patrick Butler

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A draft contract negotiated more than 20 years ago for the construction of the Gull Island Dam shows that Newfoundland and Labrador and Quebec came close to announcing an agreement in 2002. This document is used today model for new negotiations, according to the former Newfoundland premier who negotiated the agreement.

Radio-Canada obtained a copy of the draft agreement which almost enabled the construction of the hydroelectric complex in 2002.

Roger Grimes, former premier of Newfoundland and Labrador, acknowledges that the current talks, covering the possible construction of Gull Island but also the future of the existing Churchill Falls complex, are even more delicate than that. they were in 2002. But he maintains that the bases of a possible new agreement will be the same.

According to the Liberal, Newfoundland and Labrador must avoid at all costs the historic mistake of the current agreement on Churchill Falls, a 5,428 megawatt dam upstream of Gull Island, which for 65 years set the price electricity at a rate that turned out to be derisory.

The 45-year draft agreement he negotiated in 2002 – a real, detailed contract – set the price of Gull Island's electricity at 3.5 cents per kilowatt hour. This rate was indexed to the average price of electricity sold by Hydro-Québec in North America and would never fall below the threshold of 3.35 cents, allowing Newfoundland and Labrador to reimburse the construction of the dam while reaping profits, according to Roger Grimes.

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The most important aspects were in place and it was a good deal for Newfoundland and Labrador, says the Liberal, who was prime minister between November 2001 and February 2003.

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The Progressive Conservatives, brought to power in 2003, rejected the idea of ​​an energy partnership with Quebec. One more meeting, or two, and we would have had it, he maintains.

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The draft agreement shows Hydro Newfoundland and Labrador would have owned 100 per cent of the Gull Island Corporation, a new Crown corporation responsible for building and managing the 2,000-megawatt complex on the river. Churchill.

For comparison, Hydro Newfoundland and Labrador and Hydro-Québec are co-owners of the Churchill Falls complex, holding respectively 65.8% and 34.2% of the project.

We had to own the dam, that was the political conviction at the time, so the provincial government had to pay for the project, says Roger Grimes.

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Transmission lines crossing the Churchill River in Labrador last November.

The bill for the project in 2002 was $4.16 billion dollars, according to the document. Hydro-Québec was going to borrow the money from Newfoundland and Labrador, a province whose oil revenues were still not at their peak and whose borrowing capacity was relatively limited.

The way to get the best interest rate was to ask Hydro-Québec to borrow the money on our behalf, explains Roger Grimes.

People [at the Ministry of] Finance were telling me that we were almost going to reach the limit of our borrowing capacity. […] It was a gamble, but it was going to be a success. The project was going to pay off.

A quote from Roger Grimes, former premier of Newfoundland and Labrador

If Hydro-Québec was not going to own the dam, it was responsible for the construction and management of 500 km of 735 kV lines to the south , as well as the construction of the Montagnais-2 substation. The documents obtained by Radio-Canada do not specify the cost of these installations.

According to Roger Grimes, in November 2002, the only issue to be resolved was the distribution of the electricity produced at Gull Island. He says Labrador MPs in his caucus wanted to ensure that some of the energy produced at the dam was accessible to industrial customers in the region, including potential aluminum smelters.

Newfoundland and Labrador and Quebec were very advanced on the Gull Island project, more than had certainly been publicly suggested. We see in fact that there was an agreement almost signed to move forward, underlines Normand Mousseau, professor of physics at the University of Montreal.

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Normand Mousseau, professor of physics at the University of Montreal

Roger Grimes recognizes that the financial situation of the government of Newfoundland and Labrador, despite significant oil revenues, is still precarious. He says after the fiasco of the Muskrat Falls megaproject which cost more than $13 billion, about double the original bill, it is unlikely the province will undertake another project on its own.

< p class="StyledBodyHtmlParagraph-sc-48221190-4 hnvfyV">The Liberal says that Ottawa could therefore play a role in the creation of the dam, adding that if the price negotiated in 2002 gave Newfoundland and Labrador a good room for maneuver, some members of its caucus feared a situation where Hydro-Québec, as the sole lender, would take over the project in the event of payment default.

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The Muskrat Falls hydroelectric dam on the Churchill River, Labrador, in November 2023.< /p>

Normand Mousseau, also scientific director of the Trottier Energy Institute at Polytechnique Montréal, finds it difficult to envisage a scenario where Hydro-Québec's expertise is completely excluded from the construction of Gull Island, especially after the overruns. costs and technical problems at Muskrat Falls, whose transmission line reliability is still in question.

I remain surprised that [in the 2002 draft agreement] the entire construction risk is taken by Newfoundland, with no ability to reflect any overruns or problems in the cost of electricity. delivered. For me, it's a door that could have hurt a lot.

A quote from Normand Mousseau, professor of physics, University of Montreal

He also points out that indigenous governments were rather peripheral in the 2002 draft agreement.

We present the project to them a little and then we say " here, we will resolve the problems later. Today it would be difficult. I think that the Innu will have to be more present around the table, both for the transmission line and for the hydroelectric power station project, says Normand Mousseau.

Normand Mousseau adds, however, that the draft agreement and the price of electricity negotiated by Saint-Jean and Quebec show that Gull Island still today probably remains one of the cheapest development projects, potentially, in South America. North.

[The hydroelectric project of] Romaine, in Quebec, which was launched six years later in 2008 […] leads to a price per kilowatt hour, at the dam, which is approximately twice as high as what x27;we see for Gull Island, he says.

It's a project that will see the light of day, adds Roger Grimes. However, he recognizes that it will be difficult for any premier of Newfoundland and Labrador to sell a new partnership with Hydro-Québec to the public.

For decades, the Churchill Falls agreement, an agreement in effect until 2041, has represented a historic injustice for many Newfoundlanders and the Grimes government has been sharply criticized by the Progressive Conservative opposition for its collaboration with Quebec, the long-time bogeyman of the political class in Newfoundland and Labrador.

[Gull Island] depends on our political leaders and whether they have the capacity to confront the old discourse about Quebec, says Roger Grimes. Quebec is not the enemy and never has been.

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