Two premiers heralded a new era of Atlantic co-operation Thursday.
They announced a $6.2-billion power deal expected to see electricity flow via subsea cable from Muskrat Falls in Labrador to Newfoundland and Nova Scotia within six years.
Newfoundland and Labrador Premier Danny Williams said, at a media briefing Thursday, “I guess we need to make it clear: this project is a go!
“This is not only a great regional project; this is a great national project.”
Nova Scotia Premier Darrell Dexter said increased co-operation on energy issues will strengthen the economic foundation of the Atlantic region.
Mr. Dexter told reporters in St. John’s “I have always said that what is good for Newfoundland is good for Nova Scotia; what is good for Nova Scotia is good for New Brunswick.
“Having success on the East Coast benefits us all.”
In making the deal, Newfoundland and Labrador avoided Quebec – something Mr. Williams stressed was a priority.
The province instead found support – in the form of transmission assistance and bundles of cash – in its Maritime neighbour.
The deal will see the smaller of two dams developed on the Lower Churchill river.
Muskrat Falls has a capacity of 824 megawatts (MW). The larger Gull Island site, at 2,250 MW, is on the shelf – at least for now.
Officials said Muskrat Falls power is expected to be online by 2016.
About 40 per cent of the energy generated by the turbines will replace domestic needs on the island of Newfoundland. The oil-burning Holyrood generation plant will be shut down.
Emera Inc. will build a $1.2-billion subsea power link to Nova Scotia. In return, Emera gets 20 per cent of the power generated by Muskrat Falls.
The remaining 40 per cent of the power will be available for potential sale to other clients in Atlantic Canada or the northeastern U.S.
Emera, which has existing infrastructure throughout the region, will assist Nalcor with those sales, in return for a transmission tariff.
Emera will also pick up a portion of the cost to build the transmission line within Newfoundland and Labrador, along with a share of the profits it generates.
All told, Emera will foot $1.8 billion of the overall Muskrat Falls project cost.
Newfoundland and Labrador will be on the hook for the remaining $4.4 billion.
The province’s taxpayers will backstop that $4.4 billion, either through crown-owned Nalcor Energy or borrowings by the provincial government.
Mr. Williams said recent reductions in the provincial debt give the government flexibility to pay for Muskrat Falls.
“The beauty is that the province does have the financial capacity in order to be able to undertake this, which is something that we could not have done (before).”
Five years ago, Newfoundland and Labrador’s net debt reached nearly $12 billion. Thanks mostly to booming oil revenues, the amount dropped to $7.9 billion in 2009, before creeping up again this year.
The two provinces are also looking to Ottawa for help, although Mr. Williams said the project is a go with or without that assistance.
An application is pending to a federal infrastructure program for $375 million. The cash would defray the costs of the subsea link between the provinces.
“I have always said that what is good for Newfoundland is good for Nova Scotia; what is good for Nova Scotia is good for New Brunswick.” - – N. S. Premier Darrell Dexter
And Mr. Williams noted a federal loan guarantee would mean hundreds of millions of dollars in reduced interest costs.
He suggested it’s a “no brainer” for Ottawa to provide the guarantee, but acknowledged the Harper administration has not made a binding commitment on the issue.
And he rejected allowing the feds to take on any form of equity in the project in return for assistance.
Mr. Williams reacted “You’ve got to be kidding.”
There are three separate aspects to the $6.2-billion megaproject:
* the first is construction of the Muskrat Falls generating station and transmission lines between the dam and the existing Upper Churchill facility. That is expected to cost $2.9 billion, and will be 100 per cent owned by Nalcor.
* the second is a Labrador-to-Newfoundland transmission link, which will carry Muskrat Falls power to the island. That connection will span approximately 1,100 kilometres, running all the way to Soldiers Pond on the Avalon Peninsula, and cost $2.1 billion. Nalcor will take a 71 per cent stake in this line, with Emera owning the remaining 29 per cent.
* the final piece in the puzzle is a maritime link to hook up to the Nova Scotia grid. The line will run from Bottom Brook, near Stephenville, down to Cape Ray before going underwater to connect at Lingan, N.S. Emera will pick up the entire $1.2-billion price tag for that project. In return, the Nova Scotia company will get 20 per cent of the power generated by Muskrat Falls for a term of 35 years.
Developing the Lower Churchill has been a priority for a series of premiers since the 1970s.
In 2006, Mr. Williams announced the province would “go it alone” on the project, after rejecting a series of other proposals. He dismissed the suggestion Thursday’s deal fell short of that.
“There’s nothing wrong with a good partnership. It strengthens us.”
The Muskrat Falls project is expected to hit peak employment levels in 2013, creating 2,700 direct jobs in Newfoundland and Labrador that year alone.
There are, however, several hurdles remaining.
The leadership of the Innu supports the project, but a final ratification vote on the so-called ‘New Dawn Agreement’ has been delayed several times.
The various aspects of the project must also pass environmental reviews.
The premier said he hopes Thursday’s announcement will exorcise the demons of the disastrous Upper Churchill contract, which runs until 2041.
“It’s a huge milestone. It’s the day, hopefully … when Newfoundlanders can finally let go of the Upper Churchill and say, ‘Done. It’s over.’”
Newfoundland and Labrador officials have contended the province nets only $63 million a year from the lopsided arrangement, while Quebec receives an estimated $1.7 billion annually.
Mr. Williams added the province continues to push legal action in Quebec seeking redress for that contract.
St. John’s Telegram