26 October 2010

NALCOR: the power of nostalgia (Part 2)

From Jason Churchill’s paper on Labrador hydroelectric development for the Blame Canada commission, a few paragraphs on Lower Churchill development (numbers are for footnotes in original):
The story of the attempted development of the Lower Churchill River begins in September 1972 when BRINCO, using the Upper Churchill model, made a formal offer to the Moores’ government to develop the Gull Island and Muskrat Island sites. The Moores’ administration refused to accept the idea of being tied into a long-term contract with Hydro-Quebec. In 1974, after two years of failed negotiations, Moores decided to nationalise the CFL Co. portion of BRINCO. (45)  Nationalisation was presented as a matter of principle; government needed control over resources in order to mould the province’s future. At a cost of $160 million, nationalisation of BRINCO was an expensive exercise in political philosophy. The key argument underlying the move was that the public interest of the province could differ from the private interest of the company. However, Section 9(5) of the 1953 BRINCO legislation prevented the export of any power without the explicit consent of the government.(46)
A former Conservative member of the Moores’ administration, the Honourable William Marshall, considered the initiative to have been a great mistake as it “compounded the mistake” of the 1969 power contract. While costing an enormous amount of money, it did not improve the province’s bargaining position. Marshall stated that the only thing accomplished was provincial money being used to buy out private shareholders. Each year, the province continued to pay the interest on the money borrowed to finance the deal while the Lower Churchill remained undeveloped.(47) The measure failed because Newfoundland and Labrador’s core problem of access to markets without terms being dictated by Quebec remained unchanged. 
By the mid-1970s, negotiations had become increasingly complex due to inflationary pressures, the energy crisis and the overt inequities of the 1969 Churchill Falls Contract. In February 1975, after lengthy negotiations, the federal government committed to provide $425 million towards a $1.842 billion Gull Island project. While issues related to electrical transmission were not secured, the federal government was illustrating a strong willingness to provide financial assistance to Newfoundland and Labrador. However, by August 1975, inflationary pressures had forced the cost of the project up to  approximately $2.318 billion. As a result, the Newfoundland and Labrador government had to order a complete re-examination of the project and associated costs. (48)
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