Bedevilled by a contract
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.