In his year-end interviews Premier Andrew Furey repeated the line that if the deal that came out of negotiations with Quebec on Labrador hydro development wasn’t the best one, then he’d walk away.
Ok.
Go ahead.
Smile.
It's bluster.
Bluff.
Just consider two questions.
First: what’s the best deal in this context?
Or, put another way, what’s a good deal?
Furey’s attitude has been that the rest of us have no right to know what is going on until the while thing is done. And people are generally so well accustomed to his reluctance to be accountable to anyone that no one seems prepared to ask him even the simplest questions.
Like that one.
Furey cannot tell us what he thinks is a good deal let alone the best deal. That's because he went into the negotiations without any idea what provincial goals are or should be.
Furey's reluctance to talk is totally about his lack of clear goals.
If you want to really see this, assume he walks away and then ask the second question or see if you can answer it based on what Furey has said.
If Furey walks away, what’s the Plan B?
Don't waste time thinking. There isn't one.
You see, Furey fell so quickly, so deeply, and so enthusiastically for Quebec Premier Francois Legault’s Grand Seduction last winter that he went into talks without admitting he was in talks. Seriously. Furey said three people would see if there was any reason to start formal negotiations.
By September, not only were there formal talks but Legault told the people of Newfoundland and Labrador what they’d generally agreed to. Furey confirmed all this by saying nothing more than “show us the money” without any clue what he meant by it beyond a too-cute-by-half media line one of his people cooked up for him. He admitted in the process there were formal talks, thereby confirming in the process that Legault has been setting the agenda, framing the bounds of the talks, and telling the public what’s happening.
No one in Newfoundland and Labrador should be encouraged by this. If you really need convincing that the walk talk is bluster look at how Furey talks about Gull Island or Churchill Falls. Last undeveloped project. Everyone starving for power. If any of that were true he’d be a fool to walk away. He cannot really walk away since the green electricity he boasts of is tied to other green developments. In other words, Furey's talk traps him into talking until there is a deal of any kind. Because he has tied success to his own agenda, Legault had him at hello.
Truth is, had Furey thought things through, there are three separate talks rolled into one. Lumping all three into one is the frame Legault applied because it is in *his* best interest. Furey willingly accepted Legault’s approach not because it makes sense for this province but because Furey fell for Legault's seduction: the flattery of the surprise trip to St. John’s with the glare of media to dazzle the unready Furey and the meaningless affirmation of every delusion nationalist Newfs have about Churchill Falls being a bad deal.
All very much seduction in the style of the movies. Not the one with Mark Critch, Brendan Gleeson, and Gordon Pinsent. The original 2003 movie made in Quebec. Supposed to be shot in Newfoundland as the story goes because they couldn't find a fishing town in Quebec that looked shabby enough to try to lure a doctor to get a new manufacturing plant.
From Newfoundland and Labrador’s perspective - were anyone to lay it out properly - there ought to be three talks are about three separate issues.
One is expansion of the generating plant at Churchill Falls. This idea has been kicking around since the 1990s at least and both shareholders in the company that operates the generating station - NALCOR (65 and a bit percent) and Hydro-Quebec (34 percent and a bit) - could deal with this at any point.
It is a stand-alone issue and the shareholders could settle it at any time. Now that we are into the renewal of the 1969 contract, the amount of electricity available to Quebec is defined and Quebec has optioned additional power beyond that energy base determined under the contract even if NALCOR has yet to show the agreement and the cash from it in its financial statements since the deal was cut in 2021.
The second is Gull Island. Again, a stand-alone project, which Newfoundland and Labrador could pursue on its own.
The third is a decision about what happens on 01 September 2041 when the existing power contract with Hydro-Quebec expires along with a raft of others.
Bundling them together makes it easier for Quebec to accomplish its strategic objective - maximum electricity for the longest period at the lowest cost - while the other side is unable to see what is going on. That’s pretty much what has happened.
You can see the confusion when Furey talks about Gull Island compared to Churchill Falls and Muskrat Falls:
…so we have of course the history of Churchill of course is Hydro-Quebec provided both the finances and the operations and as a result Newfoundland and Labrador was on its knees when CF(L)Co was put in that position. Muskrat Falls represents us trying to go it alon.
Presumably there is a different option, again with full consultation with Indigenous partnerships to ensure that they would get the economic benefits that they're entitled to but the grid in North America is so starved for green electricity right now that I would like to think that there is a willingness of partners plural to realize the value in [Gull Island] from an economic perspective, from an environmental perspective, from a reconciliation perspective in that project.
This is gibberish. Furey’s view of Churchill Falls is ahistorical nonsense. His understanding of Muskrat Falls is equally ridiculous. But notice that he tries to invent a third alternative with lots of partners in contrast to the other two that were supposedly dominated by one or another of the Churchill Falls shareholders.
This quote is from the CBC year-ender but Furey got on with similar drivel with NTV about green steel and green nickel and all the partners at the table to develop Green Labrador (copyright pending) in a transformationally transformative green way. Don't waste time trying to figure out what he is talking about. There are only two parties at the table. These are all rationalizations to justify what Furey has already agreed to but not yet told the rest of us about.
Fir his part, Legault has already told us what is coming. For one thing, there'll be a new Churchill Falls deal that only adjusts the price to a current low one (maybe three-ish cents to start) rather than the old low one. This is a sop to Furey to let him save face, as Legault put it last September. The new deal will extend beyond 2041 for as many decades as Legault can get. Any price escalator clauses will tie the price to whatever is dirt cheap in the 2060s. They’ll add a turbine or two and let Quebec take more power.
Now this *will* give Newfoundland more money but not necessarily the most. One cent a kilowatt hour would give $300 million more a year in revenue to CF(L)Co. But since Quebec is a one third shareholder, it gets one third back in a dividend, so the real cost to Quebec would be $200 million. Since NALCOR and HQ each buy electricity for the same price from the same company, one third of any more money that goes from NALCOR to Churchill Falls also goes to Quebec. The net cost to Quebec would actually much lower, in other words, than the increased price of any electricity above the 1969 level. It's like Muskrat Falls, incidentally, where we pay and others get cheap electricity. It's just a different subsidy.
There will be a deal to develop Gull Island with the bulk of the power going to Quebec for as long as Legault can get out of Furey and for as low a price as possible for as long as possible. If it's a joint project, Quebec will get a benefit that reduces Newfoundland's take and lowers Quebec's real cost. That's a pure giveaway for Newfoundland and Labrador.
The Newf politicians will play up other things, like the construction work, which will have a locals-first clause to give as much grunt work to da b’ys in it. SNC Lavalin will do the management and engineering work. The pols will also talk about the higher price but not put it in context as we've done here.
There are already deals with the Innu to cover all of this, so the talk of Indigenous partners is just talk. There'll be extra cash for the Innu but it will as much a token as Legault's admission. If they call it a New Dawn deal, then you will know the model is “Atlantic Accord.” All principle converts to cash and you can sell the same principle more than once, apparently.
Meanwhile, the real problem in Labrador affecting the mining industry and local consumers - a lack of local transmission lines - will hamper any actual development, because none of that is actually part of the secret Furey-Legault deal.
The real hang-up on both sides is local politics. Legault will have to justify giving up the 17 years of cheap electricity left in the 1969 deal. He should be able to do that but it would be best if that sort of thing came *after* a provincial election in Newfoundland and Labrador. If Legault appeared to be too proud and too boastful before a writ, then the Newfs might figure out they’d been conned. They could turn on Furey, who does not have the political capital to sell any deal, good or bad. Even the weak Pea Sea and Dipper parties might be able to figure out problems with a deal that gives much and gets little that is meaningful.
That’s why it would be safer to put off any announcements until after Furey is safely back in the Sardine Can Room as his office looks these days. Furey can go to the polls with the foolish claim he needs a mandate to deal with a supposedlyhard-nosed Quebec crowd. That would be just more of the same false-fighting that Furey put on with the federal government. Like in the offshore wind deal, where he simply followed the federal lead and wound up arguing about nothing until the feds “caved.”
Whether there’s an announcement before or after a provincial election in Newfoundland and Labrador is all theatrics. Fluff. Air. Piffle. Just know there’s been a deal for a while, settled on Quebec’s terms. The politicians and the apparatchiki on both sides just have to figure out how to rationalize what is essentially Churchill Falls Part 2 in a way that causes the least political grief for both.
Making up a story about what happened before - like in the year-end interviews - is a sign someone is already cooking up some story the punters can believe.
The deal does not seem to be as one-sided as you describe. Quebec ratepayers would fork $15B more for Churchill Falls power (indexed to CPI) than they would had the 1969 contract gone to term. By agreeing to this, HQ would meet two major NL demands, 17 years early (1- more money/kWh, 2- indexing the price). Add to this a stipulation that a more current starting price would be set for the electricity generated by the CF extension and Gull Island projects when they're built.
Can NL wait 17 more years to get (maybe, maybe not) a larger payback?