Analyst blasts project

Michelle MacAfee
The Evening Telegram
March 11, 1998

CHURCHILL FALLS — A new hydroelectric project in Labrador would be “economic craziness” for the Newfoundland and Quebec governments, as well as for Ottawa which is being asked to provide up to $2 billion, says a national energy watchdog.

“This deal has the makings of a major financial mistake,” said Tom Adams of Energy Probe, a consumer and environmental lobby group.

“It will be generating high-cost power at a time when we are coming into a glut of low-cost power.”

Newfoundland Premier Brian Tobin meets today with Quebec Premier Lucien Bouchard in this small Labrador town to outline how formal negotiations will proceed on a second power project on the Churchill River.

It’s believed the negotiations will be framed around a $12-billion development that includes the construction of two dams and a $2-billion, 800-megawatt transmission line to the island of Newfoundland. Power would flow by 2007.

A source close to the project said the plan will involve a large hydraulic generating station about three-fifths the size of Churchill Falls that will be built downriver closer to Goose Bay.

The source said two additional units will be built, increasing the station by about one-fifth, and some major water diversion dams will be built in Quebec to bring more water into Churchill Falls.

Even with few of the details announced, Adams says such a massive undertaking is simply not feasible given the current market and expectations for the future.

Small, local power stations throughout Quebec, Ontario and the northeastern United States would be able to produce power at about half the cost — and with less risk of transmission problems — of their Churchill competitor, Adams said from Toronto.

Newfoundland and Quebec are out of step with international power players, who are trying to reduce their exposure to financial risk, he added.

“They would have to cut their costs by about half to make this deal even start to appear attractive enough to be worth talking about.”

Newfoundland Energy Minister Chuck Furey countered that two important external factors helped make this the perfect time for such a mammoth power project:

• a hydroelectric project the size of the Lower Churchill would push the Canadian government as much as 20 per cent closer to meeting its international commitment to reduce greenhouse gases.

• the American power market was recently deregulated, which is expected to make the industry more open.

“As you see a displacement of old forms of energy based on new-world realities, the new power entering the marketplace will be received in a very timely, very positive and very competitive way,” said Furey.

At the heart of any new deal is the $2-billion transmission line. Among other things, the line would provide power to a nickel smelter expected to be built on the island by Inco.

Tobin has said he is seeking the federal government’s help, and a source within the provincial government said today’s announcement will include a commitment from Ottawa to at least formally explore the issue.

It could be a tough sell, however.

Some fear Newfoundland could be seen as getting more than its share of federal dollars, since it is also seeking continued aid for unemployed fishermen.

Added to that is a continued reluctance by government to invest in so-called megaprojects.

Adams said such an investment of federal tax dollars would be terrible and unnecessary because the island of Newfoundland has enough power sources without the underwater link.

“If the province was offered $2 billion for a transmission line or $1 billion for schools and hospitals, I’d take the $1 billion because it’s worth more in cash than a transmission line,” said Adams.

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