Churchill Falls, Again, but Worse

Celebritocracy jumps own shark in dismal reboot of failed reboot

Andrew Furey announcing Churchill Falls 2 {not exactly as illustrated}

Andrew Furey has produced a masterful recreation of the legendary Churchill Falls failure, giving Quebec another 50 years of super-cheap electricity with nothing in it for Newfoundland and Labrador except a few construction jobs. For good measure, Furey fell for the same bait-and-switch con that fooled Brian Tobin in 1998. Remember as we go that for all the hype about it at the time, including the Innu Nation’s hijacking of the launch event back then, Tobin’s project was such an unremitting disaster it failed to get even a few words of mention in Tobin’s political memoir, All in good time.

For good measure, Furey has brought back all the familiar lines and catchphrases of Joe Smallwood and 1969: this is our river, this is our electricity, but now with the twist that this is our chapter when it is really *their* chapter, they being the crowd at Hydro-Quebec.

For his own twist, the Premier heading the most unaccountable and least transparent Newfoundland and Labrador government in recent memory is copying the Danny Williams-Kathy Dunderdale with their Muskrat Falls mess - secret negotiations, rigged “reviews” by the House of Assembly and the Public Utilities Board - and for a novel twist of Furey’s own, carefully controlled “webinars” in which officials from NALCOR recite prepared scripts and avoid any tough questions, just as the government learned to do during COVID. The bureaucrats and politicians learned all the lessons of Muskrat Falls, just not the ones people might have hoped for. They have now strangled all chances of anyone behind this mess facing serious questions from knowledgeable people anywhere. At his shark-jumper with Francois Legault before Christmas, Furey tore up a couple of photocopied pages pretending they were the original contract. All pure performance. Zero substance. This is the signature deal of this administration.

Let’s be clear. The core of Churchill Falls: The New Generation is a replay of the original 1969 deal but for less money. The original deal gave Hydro-Quebec to now a half century of electricity for the absurdly cheap price of first zero point five cents a kilowatt hour and more recently zero point two cents a kilowatt hour. The Furey reboot simply moves the decimal place from the old contract, giving HQ the same amount of electricity annually for another half century for 2.2 cents a kilowatt hour on average, valued in 2024 dollars. The effective discount for Hydro-Quebec’s shares in Churchill Falls reduces that to 1.43 cents, which is less than the original 1969 deal would charge Hydro-Quebec if it merely accounted for inflation. Zero point two cents in 1969 is worth 1.6 cents today.

Brian Tobin’s 1998 flop reappears in the proposed expansions, none of which are guaranteed to go ahead even after the final agreements get signatures. The only thing locked in at that point would be Churchill Falls 2: the New Giveaway. Not the added powerhouses - called CF 2 in the 2025 agreement - but the real Churchill Falls 2, the renewal of the original 1969 agreement on even better financial terms… for Quebec.

You may have forgotten but a few months into his very short time as Premier, Brian Tobin made a few speeches on the mainland about the 1969 contract. The last was in December 1996. In January 1997, HQ boss Andre Caille showed up in St. John’s with an offer to take a look at adding a couple of turbines to Churchill Falls to get more power for Quebec and give more cash to Newfoundland and Labrador under the old contract. HQ would also look at building Gull Island.

And oh by the way, said Caille, HQ would like to introduce a shareholders agreement for Churchill Falls that would change HQ’s position within the corporation that ran Churchill Falls from that of a minority to one of at least co-equal. A new by-law under the shareholders agreement also gave HQ the right of first refusal should Newfoundland and Labrador decide to sell Churchill Falls. Neither of the expansion projects happened - quel surprise - but HQ got its strategic goal of a shareholders agreement and what’s more, de facto control of the company that produced 15% of its domestic electricity supply.

This time around, the strategic goal was securing Churchill Falls as it is today for the lowest possible price and getting it for the longest possible time. HQ hit both goals out of the park securing another 50 years of electricity for functionally less than the original price and certainly for prices idiotically below even HQ’s own domestic wholesale price to its retail arm.

The Newfs will get a few construction jobs and far less cash than their electricity is worth in the current marketplace. For a bonus, should HQ shelve the expansion projects it alone controls, Newfoundland and Labrador cannot even try to build either without Hydro-Quebec until the mid 2040s, which means in practical terms another 10 to 15 years beyond that. And to highlight the contrast between Hydro-Quebec and NALCOR - currently masquerading as NL Hydro - realise that not only did NALCOR fail to get enough cash in the Churchill Falls reboot deal to pay for the Muskrat Falls debacle - they need more than $40 billion for MF but accepted only $33.8 billion in total for CF electricity - they also got less electricity from the massive Churchill Falls plant *and* the extensions (if they happen) than they need to meet their own domestic demand forecasts.

People and businesses in Quebec can look forward to decades of super cheap electricity thanks once again to Newfoundland and Labrador, just like Nova Scotians got from Muskrat Falls. All the people in Newfoundland can look forward to will be ever-spiralling rates thanks to Andrew Furey’s MF “mitigation” scheme. And they will have to find more electricity from new sources *and* pay a premium for it to meet the new demand, if the NALCOR demand forecasts are even close to real. That is a historic deal, for sure.

Let’s be clear, yet again: despite having a deal that supposedly brings 9,000 megawatts of generating capacity - if everything goes ahead - there is not enough electricity for Newfoundland and Labrador in this Newfoundland and Labrador deal to meet Newfoundland and Labrador Hydro’s forecasts of its own needs for the island (double what we have and then a bit), let alone those of Labrador. And just to reinforce how little of the expansion is likely to go ahead, understand that the 1998 expansion at Churchill Falls needed three new rivers of water to make sense. There is no new water in the Furey reboot, thus making it almost guaranteed to be swept off the plans board one HQ gets its CF renewal deal locked in.

The reason for the difference between Quebec and Newfoundland and Labrador is as easy to see as it is horrifying to realize. Since the 1960s, Quebec has had a simple plan: give people and businesses cheap electricity to support a growing economy. In 1998, HQ secured its control of the company that operates Churchill Falls with a simple bait-and-switch. They dangled Gull Island, the long-standing Lower CHurchill obsession in this province, and played down the significance of the shareholders agreement. When they got the agreement they wanted, the other two projects vanished. In 2023, Quebec was back again and used the same bait-and-switch to lock in control of Churchill Falls for another 50 years, get scads of absurdly cheap electricity again, and - whether they do the extensions or not - control of those as well for at least another 25 years.

In stark and nakedly obvious contrast, there is no energy plan in Newfoundland and Labrador, let alone the sense to realise having one might be a good thing. There has not been a coherent thought about electricity since before 2003. The result is the mess we have seen first from Muskrat Falls and now from the Churchill Falls second go. We know there is no plan because NALCOR boss Jennifer Williams told local audiences before Christmas we had a huge opportunity with new electricity that we should not squander. Were there a bit of sense at NALCOR, let alone a sensible plan or even a Trumpian outline of a plan, there’d be no need to do anything but tell us what the plan was. Jennifer Williams’ cautionary words told us she had no goals from her political masters other than getting a deal no matter what it looked like. That Martin fellow before her running NALCOR had the same marching orders from *his* boss but he got more money for his work. A bigger shag-up, cheaper. Historic indeed,

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History repeats first as tragedy, then as farce. The 1969 deal is popularly seen as a tragedy. Andrew Furey’s reboot is the farce. No one has ever thought of anything like this, the umpteenth repeat, including 1998 and Muskrat Falls, both of which were attempts to shag over Quebec, break the stranglehold, erase the shame of 1969 or whatever version of the power contract tragedy the politicians behind the failures called it at the time. Whatever is beyond farce, we are it.

History repeats with news on New Year’s Eve that Des Sullivan and Ron Penney and Dave Vardy would be cranking up the old Uncle Gnarley blog to offer some comments on Churchill Falls Reincarnate, as they did for Muskrat Falls. The trio played a key part in the anti-Muskrat force, fighting against a tragedy but this time Vardy is compromised. He served on Andrew Furey’s genius committee that supposedly advised the government in making this deal.

Worse, his first offering on the new deal is weak and pointless. Vardy offers no comment on this deal or his role in it. History does not demand there be an independent review of this deal, as Vardy claims. History shows the review Vardy wants is a simply pointless game of the sort the government is already planning to do. Vardy wants to have an “independent” review of the deal by the public utilities board or a public inquiry, knowing as he does from personal experience that the public utilities board has no legal jurisdiction, does not have the competence, and in any event is useless to do anything sensible with this deal.

The Board has no jurisdiction because the provincial government exempted the whole of the Churchill River and all developments on or related to it from the PUB’s jurisdiction in 2000 while Vardy chaired the Board. Andrew Furey’s future Clerk of the Executive Council signed the order. And as for useless, just recall that the Board sided with Hydro-Quebec and NALCOR in the water management hearings in 2009 and kept secret documents that were already public. Such is the Board’s internal level of absurdity not to mention its lack of independence.

So that there will be no doubt on this point, remember that in the review the Board did of the Muskrat Falls fiasco, at least one member of the Board was so frightened for her appointment, she packed up her office in the event the government took out its wrath on them all for failing to doing the government’s bidding. Testifying at the LeBlanc inquiry into Muskrat Falls, Darlene Whalen told the commission that Jerome Kennedy criticized the Board so harshly for its failure to reach any conclusions about the project that she “took the comments as an expression of [government’s] non-confidence in the board.” Whalen told commissioner Richard LeBlanc that “for a board like ours that acts in the public interest, … we have to have public confidence to be able to do the work we do.” She clearly mixed up public with government but she made it clear what she meant.

“So to have a minister express a – essentially, you know, an expression of non-confidence in the board, I took it as non-confidence in the work, the ability of the commissioners to continue to do their work as well. And my – I just felt if there was an expression of non-confidence expressed so publicly that he should have fired us.”

Asked if she feared for her job, Whalen said:

There was a point in time in those couple of weeks following the release of our report that I – yes, yes, yeah, I – yes.

[Commission Counsel Barry Learmonth]: You thought you might be fired or –?

Whalen: I went in one weekend and packed up my office, I was ready to leave.

Learmonth: You packed up your office?

Whalen: I did, yes.

Learmonth: Why?

Whalen: Well, I had, sort of, heard these firings don’t go very well and I was just – wanted to be ready just in case, I guess. It was a really low point in my time at the board.

The PUB is not independent and as we know from the Muskrat Falls inquiry, it cannot deal with projects like the Churchill Falls Repeat either. There are no legislated powers the government and House of Assembly could give the PUB that would override its inherently subservient nature. After all, the House gave the PUB far greater powers during Vardy’s term as chair and the Board acted on none of them, ever.

As for an inquiry, Richard LeBlanc deliberately blinded himself to any political aspects of a decision that was entirely political. He and counsel were not clear on their mandate initially and asked for public help to sort it out. Even after lengthy preparation, they were unaware that there was an earlier cabinet order, the December 2000 one, that exempted the project from the PUB’s jurisdiction. That lack of knowledge by the commission came up embarrassingly during the hearings.

Even Vardy’s first question for the review miss the mark by a wide mile. “Is the $33.8 billion present value of payments to CFLCo (which must be shared with Hydro Quebec) the best possible value for the Churchill Falls power plant…?” Let’s ask the proper question. Is the $33.8 billion the best value for the *electricity* the plant produces in the market? Obviously not. Anyone can find the answer to that. Readers here saw the comparison days after the dog and pony show with Legault. Andrew Furey’s deal is roughly $662 million in 2024 dollars each year on average when the current market value for Churchill Falls electricity for export is more like $1.2 billion to $1.8 billion a year.

As for the future value, there is no escalator mechanism in the agreement to value the electricity in the market over the life of the deal, as there was with other draft deals for Gull Island before now. Or as there today for industrial electricity in Labrador. To understand how Kafkaesque this is and how misleading Schedule G of the memorandum of understanding is, apply the Furey scheme for Churchill Falls 2 to the 1969 original. Yes, we would be getting today 1.6 cents a kilowatt hour instead of 0.2 cents but that is just adjusted for inflation. Even that 1.6 cents is nowhere near the market value of the electricity today (between 3 and 16 cents a kilowatt hour). And by the same token whatever price is listed in Schedule G may look huge compared to zero point two, but it will not be anything near the market value of the electricity five years from now, let alone four or five decades hence.

Is it the best deal available? This is a political question or a policy question, neither of which the public utilities board or a public inquiry can or should answer. Vardy ought to know this from his long experience so suggesting such a move is at best an oddly naive waste of time and at worse disingenuous. Is he still helping the government out by setting up silly questions for it to answer sillily? Let us hope not.

But to answer Vardy’s question seriously: Muskrat Falls was the best deal available only *if* it were the answer to the directive simply to build something regardless of cost, need, or effectiveness. In the same way, Churchill Falls 2 is the best deal available *if* it is all that Quebec was offering and Furey and his team desperately wanted any deal at all without regard for anything but the show value of tearing up a sheet of paper on live television.

Put it another way, put it the way your humble e-scribbler framed the issue at the time the secret negotiations started two years ago and has repeated since. Is Churchill Falls’ output for retail sale or wholesale? Vardy’s question and the critique of the 1969 deal assumes NALCOR a.k.a. NL Hydro and the provincial government it dominates have no interest in the price of the electricity from the plant except to maximize it. This is a mistake.

NALCOR’s interest is the same as HQ’s: get the most electricity for the lowest price. NALCOR sees HQ not as an export customer but as a fellow wholesale partner. The partners in Churchill Falls wholesale to themselves and profit by selling the electricity to others, typically inside their respective provinces but sometimes outside. But unlike HQ, NALCOR can charge its own customers whatever it wants, without fear of political or bureaucratic interference. NALCOR learned at Muskrat Falls it can do anything and get away with it, including beggaring its shareholder.

But these are points that neither a public inquiry - LeBlanc - or an “independent” review - the PUB - could manage to suss out the last time. LeBlanc actually *avoided* such a judgment by ignoring the entirely political nature of the political project. In this case, we have evidence already that there was both an overwhelming need for a deal and a willingness to accept only what Quebec would allow. Already NALCOR officials have told us that the reason the deal is for 50 years is because that is what Quebec was prepared top accept. What there is not is any reason to believe the PUB or LeBlanc 2 could succeed with such baked evidence where they have failed miserably before with no less chest clues. History repeats first as tragedy, then as farce. We need no more farces.

Historian Jerry Bannister asked rhetorically and somewhat tongue in cheek in 2012 what would happen in Newfoundland now that history was finished. The fight with Quebec over Churchill Falls and the endless plans to develop the Lower Churchill had dragged on for so long, Bannister wondered what would hold the public imagination next now that Danny Williams had declared victory over Quebec not once but twice. Little could anyone have guessed that rather than end time or begin some new era, Williams’ onanism had merely been another episode in a psycho drama that continues unhindered. Andrew Furey’s mess will simply give the story new life. It settles nothing and offers much fuel for more bitterness and recrimination in the years ahead, just the deal Furey tore up.

Andrew Furey is an avatar. An actor. A poser. A pretender. Lacking in originality. The contrast between Furey and Quebec Premier Francois Legault could not have been any greater at each of the meetings or the December newser in the same way the chiefs of the two Hydro companies could not have been any more stark a contrast one for the other. Furey spouts worn-out cliches one after the other. Fight Ottawa over Equalization. Joint management of the fishery. But Furey now wants us to believe he has solved the riddle of Quebec and Labrador, a problem that defeated far more experienced, articulate, clever Premiers and that Greatest Premier of all in his own mind, Danny Williams, who himself settled things with the Laurentian mafia not once but twice within 18 months. Furey has trumped proto-Trump? Inconceivable.

“In terms of the politics of hydroelectricity across Canada,” Bannister wrote in 2012, “Newfoundland and Labrador differs from other provinces in two important respects. First, unlike most dams in North America, the original Churchill Falls facility became a monument to futility. Although Brinco rather than Premier Smallwood signed the infamous deal that sees Labrador power sold at fixed prices to Hydro-Québec until 2041, it became known as the singularly most egregious giveaway in provincial history…. Twenty years after Smallwood’s death, the spectre of Churchill Falls haunts not only the public memory of the post-1949 era but also the current debate over Muskrat Falls. Exorcizing the ghost of Smallwood and avoiding a repeat of 1969 is an idée fixe that crosses regional and party divisions.”

Yet, even as the new hydro deal was celebrated, the old one was never far from mind. “It’s a huge milestone,” Williams was quoted as saying. “It’s the day, hopefully . . . when Newfoundlanders can finally let go of the Upper Churchill and say, ‘Done. It’s over’.”

What is most remarkable about this deal is that it not merely repeats all the flaws of 1969 despite the benefit of experience, the Furey give-away adds to it the trend started in 1998 to give up control of Churchill Falls to Hydro-Quebec bit by bit. Vardy asked if the $33.8 billion was the value of the plant at Churchill Falls. It is too much to imagine Vardy was being so subtle as to suggest Furey had, in effect, sold the shop. We can say, as Danny Williams dreamt, “Done. It is over” but not because we have righted a wrong or found a smarter way or solved the unsolvable riddle. Furey has merely surrendered.

It is the same as the offshore, which government after government has been retreating from since 2003. The last two - Dwight Ball and now Andrew Furey - are just the latest pair of a string of premiers over the past 20 years to give away the control of provincial resources won decades ago by governments led by both Liberal and Progressive Conservative Premiers. There has been no gain for the give-aways, at all, yet they continue. Politicians tell us that this latest give-away is yet another milestone along the road to El Dorado and the New Jerusalem yet Perdition seems to loom instead. Danny Williams’ fight would solve all our financial problems in 2005. Our last hope, they said. Now the female lead in the Furey reboot - Furey is his own love interest, all the time - would have us believe this cheesy give-away will solve all the financial problems the Liberals inherited from the Pea Seas and have only made worse in the meantime. We have heard the same foolishness so many times before and so very recently, there would hardly seem to be anyone left gullible enough to believe it, yet again. Yet here we are.

The truth is that the give-aways reflect not merely the lack of a strategic thought anywhere in our society but the lack of a mere coherent thought that did not reflect more than narrow self-interests. In the vacuum, the NALCOR bureaucracy has thrived like the parasitic bureaucracy it is, growing itself for its own sake and delivering no tangible benefit to anyone outside the corporation. In Quebec, the hydro corporation is large and politically powerful but it delivers tangible benefits to the province that flow from the purposeful control of resources.

What’s ironic about Dave Vardy’s commentary is that it reminds us not of the fiasco of 1969 - that deal makes money to this day - but of the fundamental mistakes of the 1970s and 1980s when officials like Vardy and Ron Penney and the Premiers Des Sullivan worked for looked at HQ as something to copy. They created Newfoundland and Labrador Hydro to do for this province what HQ did for Quebec.

What they and the others behind NL Hydro evidently didn’t understand was that Hydro-Quebec was not the prize but merely the outward sign of something much more profound. It reflected a political consensus - of being masters of their own house - that has endured 60 years and an economic strategy of which HQ is merely an element.

In Newfoundland and Labrador, by contrast, we have seen governments since 1996 chip away at what coherence there was to our provincial electricity policy, often with the complicity of people who were part of those earlier, hopeful developments. Forget something as trifling as the Public Utilities Board, which colludes with the hydro bureaucracy now as it did, in effect, before. Business and academic leaders in the province are barren people in a land barren of ideas, too. The House of Assembly itself is incapable of doing its job of holding to account a government that is - like the current one - determined to be not merely unaccountable through controlling every aspect of the political process (as happened during Muskrat Falls) but to deliberately withhold crucial information about a deal signed without telling anyone key bits of information after going for two years without acknowledging it was negotiating a deal as dramatically important as this one.

If next week’s debate goes off as the government has rigged it already, then we know the province is doomed. All it would take to prove otherwise, all it would take to show someone has learned the real lessons of 1969 and 1975 and 1998 and 2010 is for one politician to refuse consent to let the latest charade take the stage.

Just one out of 40.

2.5 percent of the House to hold off approval of a 2.2 cents a kilowatt hour give-away of historic, pathetic size.

The irony of simple numbers is delicious.

This column marks the 20th anniversary of Bond Papers. It reflects the ideas, issues, and attitudes that have coursed through every post, comment, or column since the first one appeared on 03 January 2005 during Danny Williams’ Great War with Ottawa for More Handouts.

“A writer inevitably writes… about contemporary events,” George Orwell wrote in 1944, “and his impulse is to tell what he believes to be the truth. But no government, no big organization, will pay for the truth.”

They may not, but you can.