
they can change the world, are the ones who do.

Steve Jobs
US computer engineer & industrialist (1955 - 2011)

Sunday, June 27, 2010

Upper/Lower Churchill

Almost everyone in this province knows the beating we took at the hands of Hydro Quebec in 1969. The infamous Power Contract that has seen Quebec reap 22 billion so far and Newfoundland a mere billion. The agreement that sealed our fate as a have not province - unless oil is high. Whatever news story we hear regarding out migration, lack of health care, social services, roads, etc can be directly traced back to the massive loss of money Newfoundland has suffered since 1969. Don't believe that? Consider that even a mere 50-50 split of that 22 billion Quebec has received so far, 11 billion, would be enough to pay Newfoundland's complete debt of today. Yes, like Alberta - debt free.

Now consider that Newfoundland has the largest per capita debt in Canada. A massive 11 billion for a population of less than 500,000 souls. We aren't getting any younger either. That means less people to pay the debt we already have - which is increasing by at least 200 million a year. That is where the hydro projects come in. Not one single shovel has been turned at the Lower Churchill. The reason - we can't raise the money locally or internationally. At an estimated cost of 6-7 billion for the Lower Churchill and another 3 billion for the under sea cable to transmit the power, well, let's just say we don't have the credit limit to cover that. Hence our Premier trying to twist arms in Ottawa to get it's Hibernia share, and other such revenue generating adventures. The only problem with that strategy is Ottawa's got it's own bills to worry about, and they need the cash.

Some here have said that Ottawa will intervene on Newfoundland's behalf, and help us finance the Lower Churchill development. That seems very unlikely. It would require the federal government side with Newfoundland in an energy war with Quebec. The political calculation is 9 million votes or 500,000 votes. Some say that we should be partners with Quebec in the Lower Churchill, but the reality is we are shaping up to be competitors in the continental energy market. Partnerships with Quebec in hydro tend to be one sided in any case. Think that is too strongly worded? Consider that when Quebec automatically renews the agreement for another 25 years in 2014 they will be paying us less than they do today. That's right - less.

There is one chance to undo all this history, recover our finances, end our financial decline, and even reverse our population lose. We must cancel the Upper Churchill agreement and recoup as much of those funds as possible moving forward. With that revenue coming in financial backers could realistically invest in our long term future. To change the deal has proven fruitless over the years, but only because the strategies have been flawed. Hydro Quebec's lawyers ensured their contact with us was air tight according to the laws of the land in 1969, and likely could not foresee any change in contract law. However, in the 1980's, we repatriated the Constitution - and the Notwithstanding Clause. Essentially, the Clause allows the federal or provincial governments to pass laws, within their jurisdiction, that would otherwise contradict the Constitution. One such area of provincial jurisdiction we can use, as others have, is language.

Our provincial government must pass legislation banning the export of hydro power to any jurisdiction that does not recognize English as it's primary language. This ties a provincial jurisdiction, which the law can be used on, to the Power Contract. I other words it would be illegal for Nalcor to sell power to Quebec. We could not be sued or even challenged in court as the Clause exempts the government that uses it from any legal challenge. It should have an inclusion that the law takes effect in 60 days, and the government may amend the law to allow sales to whomever it wishes on a case by case basis. It could also be cancelled at any time the government chooses. Suddenly, Quebec is in the same position that they put Newfoundland in back in 1969. With their American customers telling them to get their house in order, and their supply secured, Hydro Quebec will have no choice but to renegotiate. They should hurry with their offer as nobody likes a middleman.
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Sunday, June 13, 2010

Upper Churchill Falls End Game

In 1969, when the Power Contract was finalized between Brinco and Hydro Quebec, Newfoundland's fate was sealed. "Have Not" status was to be a permanent state of affairs with Quebec gaining wealth and independance. Quebec saw this as an opportunity to massively expand Hydro Quebec, as the foundation of it's nationalistic drive towards being " masters in their own house". Newfoundland has suffered ever since, and continues to do so to this day.

Many Premiers have since tried to right the wrong done by this deal, but with no success. Legal avenues have been tried. Minor, or ill advised, political pressure has been tried. Most recently the Newfoundland government's attempt to have the Quebec utilities regulator rule against Hydro Quebec in favour of Newfoundland - like that would ever happen! It has to be considered an absolute act of futility, and honestly not well thought out. The lawyers for Hydro Quebec in 1969 made sure they had Newfoundland painted into a corner with no way out - that is, according to the law at that time. They did not forsee any change in civil law that could in any way alter the Power Contract, and in this sense they were right.

However, with the repatriation of the Constitution in the 80's an answer to Newfoundland's prayers actually emerged. As a compromise with the provinces Mr Trudeau allowed the creation and insertion into the Constitution of the "notwithstanding clause". A clause that would allow the federal government or a provincial government to override certain rights within the Constitution that fell under their respective jurisdictions. Therein lies the key for Newfoundland.

In order to make this work we must first tie one of these rights to the hydro electric business. The one obvious area would be language. Quebec has made French it's primary language, including in the business sector, and utilized the notwithstanding clause to do so. It could do that, because language, business, education, etc are provincial jurisdictions. It is in effect a game that Quebec has perfected. The game has never been used against Quebec. Now it must be.

Newfoundland's House of Assembly must pass legislation forbidding the sale of hydro electric power to any jurisdiction that does not have English as it's primary language. The legislation must have the notwithstanding clause inserted in it to shield Newfoundland from any legal action from either the Quebec or Federal governments. It is within our rights to do so as language and natural resources are both within provincial jurisdiction. The language of the legislation should include a provisio that the Newfoundland government retains the right to allow exceptions to this law should it be in the interest of the Newfoundland people to do so. A 60-day implementation period should be included. This would give Quebec and likely the Federal government 60 days to renegotiate the 1969 contract with Newfoundland.

The repurcussions for Hydro Quebec would be serious. Should it fail to renegotiate the contract, power would be cut from the Upper Churchill. The United States and other customers that Hydro Quebec services would be facing immediate power losses. Hydro Quebec as a corporate entity, and certainly as a supplier of power, would be crippled. The Americans would demand that Hydro Quebec immediately negotiate with Newfoundland. Suddenly, history will be reversing itself as Hydro Quebec will now be the one that is in the poor bargaining position and the province of Newfoundland will hold all the chips and be dictating terms. One would seriously expect those terms to include compensation for revenues lost from 1969 to present and atleast a 50% share in ongoing profits. Likely, the Americans would then look to Newfoundland as future suppliers of hydro power as we own the resources. In other words, cut out the middle man.

Newfoundland does not have the funds to proceed with the Lower Churchill, let alone the underwater sea lines to the maritimes, without the revenues from the Upper Churchill. Newfoundland is already paralyzed, in reality, with an 11 billion dollar debt. For a province with less than 500,000 people that is crippling. No lender, nationally or internationally, is going to invest with that kind of debt load, and few revenues. For those that expect the Federal government to help out, well, that is being naive. Quebec and Newfoundland will be competing power giants, and the federal government is not likely to side with the province of 500,000 vs the province of 9,000,000. Politically, the cost would be suicidal.

No folks, this one we have to do on our own. This one we have to use the tools this Country has given us, and make them work for us. It is the only option now left for us. Don't be fooled by pie in the sky promises. Especially in these days after the massive debt collapse around the world. Newfoundland won't be taken seriously when looking for investment. I can hear some say: "but we've got the oil". Oil is not exactly a reliable source of income, as we have seen in the last 15 months, and it does run out. Hydro is forever. All that is required is the courage of conviction to do the right thing for the people of Newfoundland and Labrador.