1. Need: The project is justified based on meeting current and future domestic demand including industrial development, export potential and maximising local benefits.
a. Domestic demand: NALCO’s own figures forecast load growth at “1.1 percent on the Island and 0.2 percent annually in Labrador. Forecasts indicate that by 2027, an additional 582 MW of generating capacity will be required to meet the demand in the Province, an increase of more than 29 percent over requirements in 2007.”
The report varies the power measurement units (megawatts in some places and gigawatt hours in others). This makes it difficult to assess clearly the actual domestic demand and supply situation without an independent analysis.
The EIS mentions possible small hydro projects but puts the total potential at 60 to 100 MW instead of 150 MW. As well, the EIS does not include the upwards of 150 MW of capacity NALCO acquired in the December expropriation of hydroelectric assets on the island.
b. Industrial Development: The EIS lists a series of potential industrial developments and estimated energy demands. For the most part these are fanciful projects that have been kicked around for decades without ever being seriously contemplated.
Still, even if by some chance these projects all materialised and needed new power sources, the requirements for most of the Labrador projects could be met using Churchill Falls power under the recall option in the original contract. Additionally, CFLCo could divert additional power beyond the original contract amounts through an agreement with Hydro-Quebec. Such an approach would be attractive to HQ since it would increase the profitability of CFLCo.
Project | Power Demand (MW) | Status/Notes |
Aluminum smelter (Labrador) | 560 | Studied since 1970s. Unlikely, based on market demand, costs etc. Would require large amounts of power at or below production cost to offset costs of importing raw materials and transportation to markets. |
New iron ore mine (Labrador) | 255 | |
Uranium mine | 35 to 45 | Could be met with power from CFLCo. |
Silicon smelter (Labrador) | 50 | Promoted since 2000, the project for western Labrador has thus far failed to materialize. |
IOC expansion (Labrador) | 20 to 30 | Currently on hold pending changes in markets. Power need could be met through Churchill Falls recall. IOC is a partner in Twin Falls Power Corporation which currently supplies power to western Labrador through an arrangement with CFLCo. Power demand for the expansion could be met easily through the existing recall arrangements under the 1969 Churchill Falls contract. |
Voisey’s Bay underground mine (Labrador) | 40 to 50 | VBNC currently meets its electricity demand using thermal generation. Expansion could be powered using same method. Potential exists for small hydro development closer to project than Lower Churchill. Transmission lines from LC to VB would add significantly to project cost. |
Refinery (Newfoundland) | 175 to 235 | Second refinery project died in 2007. Only reported dead publicly in 2008. Current status: dead. |
Nickel refinery (Long Harbour) | 80 | Can be met with existing capacity, additional capacity expropriated from AbitibiBowater or development of added capacity through wind generation and small hydro. |
2. Cost: The project, consisting of two dams and hydro lines connecting to Churchill Falls, is estimated to cost $6.5 billion. This seems low based on the recent Montreal Economic Institute study of Hydro-Quebec and some media reports are carrying the estimated cost of the project at $10 billion. Both figures apparently come from the proponent. This suggests the project is considerably less well developed than it appears. Were it close to actual development, the costs would not be varying by over 50% in the time it took to revise this EIS document. ($6.5 billion to $10 billion)
As a Crown corporation, NALCO debt is backstopped by the provincial government and therefore affects the province’s financial status. As current structured, this project is larger than the current provincial government accumulated borrowings and approximately the same size as the provincial government current net debt (assets less liabilities).
3 Timelines: The project will not complete the environmental review process until late 2010 or early 2011. If built, the project would require a decade to bring fully on stream.
This is considerably at odds with comments by NALCO chief executive officer Ed Martin who claimed as recently as October 2008 that problems in American capital markets would delay the project by a mere six months. By contrast, the Premier has been lowering expectations on the project timelines since early 2008.
A proposal by Ontario and Quebec in 2005 suggested project sanction in 2007 with first power by 2011 at the earliest. This was rejected in favour of the so-called “go-it-alone” option which envisaged first power in 2015.
4. Land claims agreements. The Innu land claims vote originally scheduled for January 31 was cancelled with reports the Innu Nation and the provincial government had returned to the bargaining table to discuss “outstanding issues.” There have been signs of problems with the agreement since shortly after it was signed on top of contentious periods during the negotiations.
The EIS does not discuss the most recent developments, noting only that the land claim is still being negotiated (p.25) and that the provincial government and Innu Nation signed an agreement in September 2008 that “resolves key issues related to the land claims (Innu Rights Agreement), Innu redress for the upper Churchill hydroelectric development and the lower Churchill (Project) IBA.” This may not be accurate.
5. Power purchase agreements. No sign of any at all anywhere with any body. They are crucial to securing long-term financing. The EIS merely describes a standard, theoretical structuring of mostly long-term agreements supplemented by short and medium-term contracts.
6. The Long Way Around, a.k.a the Anglo-Saxon Route. Originally conceived by Joe Smallwood as a negotiating ploy for dealing with Quebec, the idea of stringing power lines to the island and then on to the Maritimes remains more fantasy than reality. The concept has always floundered on the basis of cost. The ASR remains a rhetorical device for this project.
A line to the Avalon peninsula from the Lower Churchill is being sold in part because of its potential to be extended southward to the Maritimes. The Nova Scotia Liberal Party leader recently met with Premier Danny Williams to discuss the ASR. NALCO and Emera signed a memorandum of understanding to explore the possibility of moving power from Muskrat Falls and Gull Island to Nova Scotia.
The EIS mentions this project only obliquely.
7. Project linkages or Do they not talk to each other in the office? The Lower Churchill project is justified in part on the basis of replacing thermal generation at Holyrood. The EIS contains no proposal for meeting that requirement. Instead, the line to Newfoundland is referred to as an addition. All the same, it appears that this document has not been updated in some time. Either that or people within the office don’t talk to each other.
EIS comment on the line to Newfoundland sent for environmental review within the last two weeks:
At the time of this filing/submission, Nalcor Energy expects that there has or will be a registration and project description filed for the proposed Nalcor Energy Labrador‐Island Transmission Link project.8. Alternatives: When you are the proponent of a megaproject that is largely driven by political considerations, you are likely to give short shrift to alternatives to the politically-favoured project.
a. Conservation: Estimated to reduce demand growth (2007 to 2027) from 29% to 17%. The implication of this is not discussed at all since it dramatically alters the demand profile being used to justify the project.
b. Wind: Wind capped at 80 MW due to what NALCO describes as problems with management of demand flow. NALCO already has contracts for 54 MW.
c. Natural gas: EIS gives a cursory discussion of natural gas noting only that the technical and economic feasibility of gas-fired generation has not been established.
d. Added capacity: A vague discussion, at best, this section does not catalogue the existing alternative hydro generation sites.
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