Problems at Churchill Falls only start with Innu

Jay Bryan
The Gazette
March 10, 1998

There are so many good things that can be said about the proposed Quebec-Newfoundland hydroelectric mega-project on Labrador’s Churchill River that it seems almost churlish to point out that it seems to make no economic or environmental sense.

The project would, after all, bring upwards of $9.7 billion in investment to Newfoundland and doubtless hefty spin-off benefits for Quebec’s makers of electrical equipment, provide an estimated 16,900 person-years of employment to two provinces whose unemployment rates are cruelly high and perhaps help reconcile the bitter political differences that have divided these provinces for years.

But at what cost? The first and most obvious cost will be exacted by the Innu community of Labrador, which has had 27 years to contemplate the heavy price it paid when huge tracts of its traditional lands were inundated by the reservoir that spreads out from the original Churchill Falls hydro project.

What amount of compensation might eventually be negotiated is impossible to predict, but it is already evident that the Innu are unlikely to settle quietly for a token amount. Premiers Bouchard and Tobin were reminded of this yesterday as they were blockaded by protesters on the way to their elaborate staged announcement, then pursued and interrupted relentlessly as they sought to improvise a more discreet press conference.

Perhaps more important, the Innu have already lined up a significant number of environmentalist allies in the project’s most promising potential markets, New England and New York state. A coalition of 19 such groups announced yesterday that unless Innu demands are satisfied, they will lobby against any U.S. bond issue to finance the project and any purchase of power from it.

This flexing of aboriginal muscle, which calls to mind the successful campaign by the Cree of northern Quebec against the Great Whale hydro project, means that no investor can be at all certain that the project will be built within its 10-year construction schedule or at its budgeted construction cost.

Such opposition would be a significant factor even for a very promising hydro project. For one whose economics are as marginal as those of the huge lower Churchill complex, it could well prove to be the last straw.

That doesn’t mean that the project won’t go ahead, of course, just that the politicians who back it will have to work a little harder to conceal its real costs from the taxpayers who will ultimately pay the tab if this massive investment goes sour. Such pessimism might seem unwarranted if you accept the assurances of senior officials from both Quebec and Newfoundland that hydro power from the Churchill River is ridiculously cheap compared with the price of electricity in the U.S.; that any form of hydro power is environmentally superior to power generated by other means; and that such multi-billion-dollar projects are a good way to provide employment. But these assurances are mostly hot air.

Let’s take the last point first, since it is mostly on the basis of employment that this project will be sold. Quebec and Newfoundland have issued an estimate that this project will create 16,900 person-years of employment, which sounds like a lot. But if you spread this over the project’s 10-year lifespan, it works out to an average of 1,690 full-year jobs in each year.

If all of these jobs had existed at the end of last year, and if they had been distributed in Quebec and Newfoundland in proportion to the size of the labour force in each province, they would have pushed down the unemployment rate in each province by 4/100ths of one per cent.

If you accept the project promoters’ calculation that there will also be so many spinoff jobs that total employment will swell to 49,000 person-years, the average number of jobs over the project’s lifetime jumps to 4,900 jobs, but unemployment in Quebec and Newfoundland still drops by a mere 12/100ths of one per cent.

Is this project good for the environment? Far from it, suggests Tom Adams, executive director of Energy Probe. While hydro power can lower the carbon-dioxide emissions blamed for global warming by replacing other forms of generation that require the burning coal, oil or natural gas, this isn’t worth doing at absolutely any cost.

Adams calculates that the new Churchill River complex will cost well over $3,000 for each megawatt of installed generating capacity. By comparison, smaller-scale hydro sites are available much closer to the population centres that will use the power, and their cost per megawatt of installed capacity is as little as half this amount.

Indeed, even natural-gas-fueled generators, which cost a fraction as much as hydro stations, can more economically reduce carbon-dioxide emissions than the Churchill River project. This is because they replace dirtier power generated from coal or heavy oil.

Finally, the notion that power is so expensive in the U.S. that Canadian utilities can sell everything they can generate is wildly optimistic.

Hydro-Quebec president Andre Caille was quoted yesterday as saying that power from the new Churchill River project can be delivered to the U.S. for 4.2 cents per kilowatt-hour, while no U.S. producer can generate power for less than 5.7 cents.

It’s hard to know what statistics Caille is relying on, but independent researchers from both Energy Probe and the Helios Centre have calculated that Hydro-Quebec is actually losing money on energy exports. The Helios Centre concluded in a recent study that the utility can’t deliver power to the U.S. for less than about 4.4 cents, while it received only 3.16 cents per kilowatt-hour for this power in 1996, the most recent year for which figures are available.

Adams notes that today’s spot wholesale price for power in states bordering on Quebec is between 2 and 3 cents. He believes that even if energy prices in the U.S. rise, as they probably will, there is only a thin chance that they will rise enough to make the Churchill River project profitable.

"This is a really risky project," he concludes. Of course, that needn’t cause Premiers Bouchard and Tobin to lose any sleep. By the time the real costs and benefits are evident, they’ll already have reaped the credit for highly visible, if temporary, jobs. Others will be left to pay the price.

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