Be­dev­illed by a con­tract

The Compass - - OPINION -

The Churchill Falls con­tract con­tin­ues to be­devil the very heart and soul of New­found­lan­ders. And with good rea­son. I of­ten won­der i f any o ther prov­ince would be ex­pected to roll over and play dead if such an un­fair con­tract were al­lowed to con­tinue in per­pe­tu­ity.

The tale is a sad one. The in­fa­mous con­tract is se­verely lop­sided. John C. Cros­bie sum­ma­rizes the bot­tom line in his 1997 au­to­bi­og­ra­phy, No Holds Barred: My Life in Pol­i­tics: “Que­bec gets rich, rel­a­tively speak­ing, while New­found­land — the owner of the re­source — gets noth­ing.”

A brief re­view of the in­fa­mous con­tract may be in or­der.

The prov­ince’s great­est nat­u­ral re­source is with­out a doubt the hy­dro-elec­tric po­ten­tial of Labrador’s Churchill River. But the harsh re­al­ity is that to­day New­found­land re­ceives vir­tu­ally noth­ing from it.

“In the worst pub­lic-pol­icy mis­take Canada has ever known,” Cros­bie con­tin­ues, “Joey Small­wood agreed to sell vir­tu­ally all the elec­tric­ity pro­duced on the Up­per Churchill to Hy­dro-Que­bec at a low, fixed price for 65 years with not even any ad­just­ment for in­fla­tion.”

The con­tract was signed in 1969. At 12, I would have had no in­ter­est in it at the time. How­ever, it has since cre­ated a keen sense of ou­trage. And it will only worsen with time.

Mel Baker of Me­mo­rial Uni­ver­sity notes in a re­cent edi­tion of Gazette, “ The Churchill Falls is­sue seems to fol­low cy­cles.” James Feehan, also of MUN, adds, “It hits the news for a while and then peters out, only to resur­face some time later.”

In re­cent times, Premier Danny Wil­liams brought the fes­ter­ing sore to the sur­face again when he spoke about the dif­fi­cul­ties of start­ing the Lower Churchill devel­op­ment. To add in­sult to in­jury, the Churchill Falls Labrador Cor­po­ra­tion (CFLCo) went to court in Que­bec to chal­lenge the con­tract.

As Fe­han says, “ These types of events trig­ger na­tional me­dia cov­er­age.”

Feehan and Baker have now pub­lished a use­ful paper that helps put the con­tract in its proper con­text. The Churchill Falls Con­tract and Why New­found­lan­ders Can’t Get Over It ap­pears in the Septem­ber is­sue of Pol­icy Opt i o n s . ( It m a y be ac­cessed at http://www.irpp.org/po/ar­chive/sep10/feehan. <http://www.irpp.org/po/ar­chive/sep10/feehan.

Pro­duced by the In­sti­tute for Re­search on Pub­lic Pol­icy, the mag­a­zine is in­tended “ to en­cour­age an in­formed de­bate on the im­por­tant pub­lic pol­icy is­sues of to­day and to­mor­row.”

The power con­tract be­tween Hy­dro-Que­bec and CFLCo was inked in 1969. Ac­cord­ing to its terms, most of the power must be sold to Hy­dro-Que­bec on a longterm ba­sis at a low price. As late as 1997, Hy­droQue­bec re­ceived $800 mil­lion per year, while New­found­land re­ceived a mi­nus­cule $ 10-12 mil­lion. Then, the fed­eral govern­ment took that amount away in a re­duc­tion of equal­iza­tion pay­ments.

Yet, Small­wood in his mem­oirs, I Chose Canada, in­cludes Churchill Falls among his “glad­ness mem­o­ries.”

You gotta won­der. Baker and Feehan rightly state that the con­tract is now “a mat­ter of en­dur­ing re­sent­ment” in the prov­ince.

The New­found­land govern­ment has since chal­lenged this con­tract by ap­peal­ing to Cana­dian pub­lic opin­ion, re­quest­ing the Que­bec au­thor­i­ties to rene­go­ti­ate the con­tract, and ask­ing the fed­eral govern­ment to help re­solve this is­sue once and for all. All chal­lenges and tac­tics to date have failed.

The un­der­ly­ing cur­rent is that out­siders are once again ex­ploit­ing the prov­ince. The ques­tion must be asked: Is it time to move on and let by­gones be by­gones?

If the an­swer to this ques­tion is in the af­fir­ma­tive, then there is yet an­other ob­sta­cle to be faced: the con­tract’s re­newal clause. In short, it al­lows for “au­to­matic re­newal at the ex­piry date for a fur­ther 25-year pe­riod with the ar­range­ments pre­de­ter­mined.” In other words, “A price of $2 in 2016 with that price fixed un­til 2041 is barely dis­tin­guish­able from be­ing free.” It beg­gars the imag­i­na­tion. Feehan and Baker fo­cus on “this ex­tra­or­di­nary re­newal ar­range­ment.” They do so by plac­ing it within the con­text of the over­all ne­go­ti­a­tions.

Their con­clu­sion? “It is in­con­ceiv­able that any party to a com­mer­cial trans­ac­tion would know­ingly and will­ingly agree to­day to sell its ser­vices some 50 to 75 years in the fu­ture at a price fixed be­low the cur­rent price, ex­cept if ei­ther forced to do or given com­men­su­rate com­pen­sa­tion; in this case, the lat­ter did not hap­pen.”

Be­cause of this, along with “ the ever­more lop­sided out­come,” the ma­jor­ity of New­found­lan­ders will never be able to put the con­tract be­hind them. That’s a guar­an­tee.

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