10 August 2009

Fantasy Island II: Churchill Falls and s.92(A)

Tom Careen of Placentia is apparently vying for the title of Chief Fantasist here on Fantasy island.  He’s become a regular letter writer to the Telegram usually on some topic out of the nationalist collection of fairy tales.

His latest one is an old nationalist chestnut, namely the Churchill Falls deal:

On page 191 of the Young Commission report, there is this paragraph: "In several meetings, we heard that Newfoundland and Labrador should pursue its constitutional rights under Section 92A of the Constitution Act, 1867, to access power and energy from Churchill Falls for industrial purposes in Labrador and on the island."

This is supposedly a magic solution to the 1969 contract that sees Hydro Quebec buy power from Churchill Falls at an extraordinarily low rate until 2016.  At that point, the contract automatically renews until 2041 at an even lower rate.

Now it would appear that these people  - careen included - actually bothered to read section 92(A), an addition to the Constitution Act in 1982.  That will become plain in a moment.

What they are talking about is actually the now famous Churchill Falls legend about a power corridor through Quebec which – if you believe this part of the fairy tale – the request for which the federal government rejected in the 1960s for fear of inflaming Quebec separatists.

This is where the problems start.

Firstly, it doesn’t appear such a request was ever made in the first place, in order for it to be rejected.

Second, there was little incentive for the Newfoundland government to make the request in the first place.  Churchill Falls may have been a deal between a private company – BRINCO – and Hydro Quebec but the project was one of Joe Smallwood’s great provincial projects.  Anyone recall his words at the sod-turning, the bit about “our river”?

Well, one of the reasons why Smallwood most likely never made the request in the first place is that it would have been made under the old section 92 (10).  In effect, had the request on the power corridor been made and accepted, the entire project would fall under federal jurisdiction and the entire Churchill Falls venture would have become a federal Crown corporation.

Not a provincial project any longer, but a federal one with no Joe Smallwood to take any of the credit for bringing it about.  He’d have had to take a back seat and watch as one of his favourite pet projects was ripped from his hands all in order to deal with the tough negotiating position Hydro Quebec was taking.

Despite there being virtually no evidence the power corridor was anything more than a weak-assed bargaining ploy by Smallwood on behalf of BRINCO, the legend persists.

And, it appears that the whole myth has morphed from 92 (10)(a and c) to s. 92(A).  on the face of it you can see how the whole thing changed simply in the retelling:  there’s a ‘92” and an “a” in both;  all you drop is the “10”.  Stranger things have happened.

Of course, you’ll notice that at no point does anyone who mentions 92(A) usually ever discuss what the clause actually says.  There is a summary on page 116 if the final report from the Young Royal Commission but that only highlights the shortcomings in Careen’s idea. All s.92 (1) does is ensure that the provincial governments can make laws governing non-renewable natural resources.   The Young commission makes several recommendations but they are really vague.  The wording is essentially that the provincial government should look after the best interests of the province including taking into consideration s.92(10).

But they don’t recommend anything specific and that is telling.

Simply put, there is nothing specific in s.92(10) that provides any solution to the Churchill Falls contract power rates.  The provincial government can tax power exports but it can tax in such a way as to discrimination against export power.  In other words, any tax applied to Churchill Falls  - virtually all of which is exported - would also apply to power from Holyrood or Baie d’Espoir, all of which is consumed inside the province.

Tom Careen would have known that if he’d bothered to read the Constitution Act or even notice what the Young commission report actually says when it summarises what s.92(10) says.

Then  again, as Chief Fantasist you wouldn’t be interested in anything except…well…fantasy.