The Current - New hope for N.L. over tentative hydro energy deal

Episode Date: December 13, 2024

Quebec and Newfoundland and Labrador have struck a new hydro energy deal. It replaces the previous pact that saw power leave the Churchill Falls hydroelectric plant in Labrador at a very low price. The tentative renegotiation will see Quebec pay 30 times the previous price. Premier Andrew Furey and the CBC’s David Cochrane share why the old agreement bred resentment within N.L. for more than 60 years, and how this step forward could change their province forever.

In 2017, it felt like drugs were everywhere in the news, so I started a podcast called On Drugs. We covered a lot of ground over two seasons, but there are still so many more stories to tell. I'm Jeff Turner, and I'm back with Season 3 of On Drugs. And this time, it's going to get personal. I don't know who Sober Jeff is. I don't even know if I like that guy.

On Drugs is available now wherever you get your podcasts. This is a CBC Podcast. Hello, I'm Matt Galloway and this is The Current Podcast. My friends, I am humbled to deliver some extraordinary news with you all. Today, everything changes for Newfoundland and Labrador. Andrew Fury made the announcement yesterday. There is a new draft hydroelectric deal between Newfoundland and Labrador and Quebec. It replaces a 65-year-old contract between the provinces

that generations of Newfoundlanders loathed and fought to change. The old deal fixed the price of power flowing from Churchill Falls to Quebec between the provinces that generations of Newfoundlanders loathed and fought to change. The old deal fixed the price of power flowing from Churchill Falls to Quebec at a very, very low price. The new memorandum of understanding increases that price 30-fold, and for Quebec, it secures a half-century of reliable hydropower. Here's Quebec Premier François Legault. It's a win-win deal. 200 billion for Andrew, 200 billion for me. It's a win-win deal. $200 billion for Andrew, $200 billion for me.

It's fair. Andrew Fury, the Premier of Newfoundland and Labrador, is on his way to Churchill Falls this morning, and he joins us now. Premier Fury, good morning. Morning, Matt. You said this changes everything. It certainly does.

It changes everything for the people of Newfoundland and Labrador. The cultural and economic significance of this is hard to overstate for people across the country who may be listening. The deal, as you suggested in the opening, was secured power for Quebec at a very, very low rate, almost free. 0.2 cent kilowatt hours, not two cents, 0.2 cents. So you can imagine that this has been a source of contention in Newfoundland and Labrador from an economic and fiscal perspective, but also a cultural one as well. But yesterday, we set a new path, we set a new path to work together with Quebec to fully recognize the value of the current asset and to work together to develop future assets and to not repeat mistakes of the past.

Can I ask you about that cultural significance and how bad the blood was between the two provinces based on what a lot of people in your province thought was a raw deal? So I grew up as a generation thinking that we would never see the benefits of the Churchill Falls asset, of the Churchill Falls generating facility. And it really led to a significant amount of anger, of resentment towards the people of Quebec from Newfoundlanders and Labradorians. And it was directed not just at Hydro-Quebec, it was almost personal. It was very emotional. It helped frame many angry debates in pubs and card games and curling rinks throughout our province over the years. Everybody in Newfoundland and Labrador has some understanding of the lopsided deal. Everybody.

You can stop anyone on any street at any moment and ask them about Churchill Falls, and they'll be able to tell you how it has impacted the economics and the psyche of Newfoundlanders and Labradorians. Well, yesterday, that changed. So not only is this a great moment for Newfoundland and Labrador, it's a good moment for Quebec. It is a good moment for Canada. This is a deal that was set to expire in 2041. Why would Quebec agree to reopen it now?

Well, 17 years early is good for us, of course. It allows increasing revenues by 30 times, as you suggested. It's an average of a billion dollars a year, every year, between 2025 and 2041. But for Quebec, it gives them certainty. They're selling long-term contracts, power contracts, that right now they're not sure they could provide. For reference, for people listening, the Churchill Falls generating facility is 15% of Hydro-Quebec's firm capacity.

So this allows them to look at their power situation to meet their industrial and domestic demands, export demands, with a degree of certainty, which we never had a problem with. We just wanted our fair share. And yesterday we signed a memorandum of understanding that will allow for Newfoundland and Labrador to get its just and fair share. Timing, of course, is everything. The Quebec Premier, Francois Legault, is not particularly popular in his province. What do you think that did to his willingness to have a peek at this now? peek at this now? We both said from day one that politics would have to be set aside in order to negotiate this deal. This has nothing to do with political timelines. Come on, hold on a second. This has nothing to do with political timelines? You're facing an election in a year, and his political fortunes are in free fall. I can't speak to his position, but this has nothing to do with, this is too historic, Matt. I'll push back on the premise of that. This is too historic. This is writing

generations of wrong for Newfoundland and Labrador. It's too, it's too important to attach political electoral cycle wins or losses to it. This fundamentally changes everything for Newfoundland and Labrador, and it has nothing to do with short-term political wins for me. It does give you something to campaign on next year in the election, though, does it not? I hope everybody campaigns on this. I hope everybody looks at this. I hope everybody understands the value that this will bring to Newfoundland and Labrador. But I want to be perfectly clear. The motivating factor to get to this deal was not about timing of an election cycle. The annual budget for your province is just over $10 billion.

And we heard Francois Lago saying $200 billion over the course of this could flow toward Newfoundland and Labrador. That's a lot of money. What are you going to do with that money? We will be very responsible with this money. We have seen ourselves in surplus situations before and not invested wisely. Under our government, this government, we created a future fund, for example, to start saving the revenues received from non-renewable, the revenues received from non-renewable resources for the future. So right now we have set up in our province the

ability to pay down debt with this money. We have the ability to save for the future with this money and we have the ability to return it to Newfoundlanders and Labradorians all at the same time. This will mean more hospitals, more roads paved, more nurses, more doctors. The people of Newfoundland and Labrador will feel the benefits of this money today and into the future. When you say that everything changes, I mean, what's the first thing that you want to see change when that money comes in? It starts, to your point, it starts the beginning of next year. So certainly we would continue to make the appropriate investments on behalf of Newfoundlanders and Labradorians, understanding that everybody is facing cost-of-living pressures right now.

This will allow us to build new hospitals, allow us to modernize the infrastructure across Newfoundland and Labrador. But I'm very excited, and it doesn't sound exciting, but to make investments in that future fund. That will allow us to grow a savings account that hopefully my children and grandchildren can live off the proceeds of that. As you well know,

tens of thousands of Newfoundlanders have left the province. People have gone to work elsewhere, perhaps temporarily or perhaps permanently. Is there the opportunity, when you talk about everything changing, that people could be lured back, that they would see hope and opportunity in a province that perhaps they didn't see before? 100%. The construction of the new developments alone will require tens of thousands of jobs for Newfoundlanders and Labradorians. On top of that, we have access to 1,500 new megawatts of power, which will allow for industrial development in Labrador in particular,

which will also create real, sustainable, future-focused jobs. So not only does this change everything from the direct economic impact, the direct fiscal impact, the indirect and induced economic benefit to the people of this province and subsequently to their families is game-changing. You're on your way to Labrador this morning. How are you going to work with the INU on this and ensure that as this develops, and as you mentioned, this is this project, but there's a future development as well, that that development works in concert with that community's needs?

So we've got a great relationship with the Innu Nation. The Grand Chief was there yesterday. They have rightfully secured their position with respect to the Churchill River in an existing agreement that sees impacts and revenues considered for them, whether it's on a redress with respect to a new contract on the upper Churchill or their position in development of Gull Island. But there is also the potential to work with them on other adjacent developments on the river. And we're certainly willing, wanting to continue conversations with them about how we can partner to truly walk towards a path of economic reconciliation. What about selling this to the broader public? To your point, there's a lot of bitterness in Newfoundland and Labrador

around the legacy of this deal. I was listening to the call-in yesterday, and a man said that in some ways you have Quebec over a barrel. He used saltier language than that, suggesting his words, where you've got Quebec by the gonads. They need the power. This is a better deal, but is it the best deal? And people will want to know that in part because I'm sure Joey Smallwood in 1969 thought he had a great deal as well. Well, this is an excellent deal for Newfoundland and Labrador. It is a fair deal. It is a just deal. But you understand the suspicion that people in your

province will have? Of course, of course. And this is a good deal. We believe that it maximizes the value for Newfoundland and Labrador, but in particular, it gets rid of the mistakes in the past. So this is, if we're speaking exclusively about the Upper Churchill Agreement, this will be market-driven prices that when Hydro-Quebec does well, for example, we will do well. That's very different than the first contract, we will do well. That's very different than the first contract, which was fixed at an extremely low rate. So not only does this have the ability to escalate, this has the ability to escalate as markets escalate. So if there is a disruption in the energy markets around the world and suddenly electrons are worth far more than we even predicted they would be, we will share in that benefit. You said you were humbled to make this announcement.

Just finally, why did you use that word? Well, it was an emotional day, as you suggested, for everybody across Newfoundland and Labrador, and it was a special moment to be Premier at this particular moment where we were righting the wrongs of the past, but more importantly, setting a path for the future. And you don't get many moments like that as a leader of a province. And I found it emotionally overwhelming and consequently humbling.

I'm really glad to talk to you about this. Premier, thank you very much for taking time. Take care, Matt. Andrew Fury is the Premier of Newfoundland and Labrador. In 2017, it felt like drugs were everywhere in the news. So I started a podcast called On Drugs. We covered a lot of ground over two seasons, but there are still so many more stories to tell. I'm Jeff Turner, and I'm back with season three of On Drugs. And this time it's going to get personal. I don't know who Sober

Jeff is. I don't even know if I like that guy. On Drugs is available now wherever you get your podcasts. David Cochran is the host of CBC's Power in Politics. He is a proud Newfoundlander. He is in our Ottawa studio. David, good morning. Good morning. You have covered this story your entire career. Yeah. What reaction are you hearing from folks back home? I would say the word to describe the reaction is disbelief, but in every sense of that word, you know, sort of, I don't believe it when they heard the news to, I don't believe it. You know, the optimism that this could finally be righted in a way that helps Newfoundland and Labrador. I had a longtime friend text me and say, I wish my dad was alive for today. But then I had a bunch of other people saying, how is Quebec screwing us now? What's the catch? So that's that skeptical cynicism that is ingrained there after decades of this lopsided deal. Well, and that speaks to, I mean, the premier talked about how you can go to a curling rink

or a bingo hall or a pub and people will talk about this. How fraught was that original deal? And what did that do to the psyche of folks in the Finland Liberation? Well, it's kind of, there's been this scar on the psyche of the place, right? I mean, this deal was struck four years before I was born and was supposed to run long after I retired, you know? years before I was born and was supposed to run long after I retired, you know. And throughout that whole time, you saw Quebec get enormous wealth compared to what Newfoundland and Labrador was able to get. And I remember, you know, Matt, when I was in university and the fishery collapsed,

you know, it's never going to go work in that industry, but it was the cultural and economic spine of the place. And it sustained the place and it was gone in a massive way to the point that 10% of the province's population left. And you hold up an economic catastrophe like that against the lost opportunity of a 5,000 megawatt, you know, clean energy economic battery that you couldn't tap into for help. You just saw the tragedy and the struggle and the hardship on one side of that border, and then the prosperity and the opportunity on the other side of that border. And the imbalance of this arrangement was always part of it. Just the revenue it would have provided with an even marginally higher price of power or with an escalator clause in that power contract,

of power or with an escalator clause in that power contract, so many of the structural financial challenges of the government would have been gone in a second. And so if this deal is finalized, again, this is a draft deal. There are still steps that need to be taken to get it signed and the I's dotted and the T's crossed and what have you. But if that happens, what is the promise for the province? What impact could those billions of dollars have? Well, look, you're right. It's a memorandum of understanding. And, you know, the premier, I just heard him talking about the cultural importance of this and the healing importance of this and that that all matters. But, you know, Ron Hines and my favorite song from back home wrote, you know, you can't eat the air and you can't drink the sea, right? So it's about the money. And if it is as advertised, and that is the question that

needs to be answered, a billion dollars a year on a $10 billion budget where there's a $200 million deficit, it means the end of structural deficits. I mean, I've covered Newfoundland and Labrador budgets where there were surpluses, but they were accidental or they were surprises. It's because, you know, at the height of oil production in the offshore, oil prices surged. And suddenly what was meant to be, you know, a modest deficit became this windfall surplus. But that was from a non-renewable resource. This is going to come in every year for the next 50 years. And if it is as advertised, and if they do it right, the days of deficits in Newfoundland and Labrador should, and I say should, be over for the rest of my life, which is not something I ever thought I would imagine. Like,

as you said off the top, I've covered this story my whole career. I never thought there would be a happy ending. There's the potential for a happy ending now. This is a chance and it's what they do next that matters. What does that mean for the day? I don't want to come to what they do next. What does that mean for the daily life of people in the province? I mean, the premier mentioned hospitals and healthcare. I mean, it's those things that presumably the government would have money to invest in, money that it could have never possibly imagined before. Well, not just that. I mean, Newfoundland's debt, its net debt is the highest on a per capita basis in the country by like 200 percent. I think it's twice as high as the next highest province. And I remember during the height of the pandemic when Dwight Ball was the premier of Newfoundland and Labrador, Matt, he wrote a letter to the prime minister saying that they couldn't borrow. Like they went to the markets to get

borrowed, to finance their operations, and the bond markets wouldn't respond and give them an offer because their financial situation was so precarious. They were looking at setting up credit lines so that hospitals could function during COVID. This,'t necessarily create jobs, the power purchase agreement, like the new developments will. But if you can wipe away a structural deficit, reduce that debt, set money aside, have cash to cash finance your capital construction, your road work and these things and not deficit and debt finance these things. It just frees up money for stability and investment in the things that really matter and address the socioeconomic challenges of the place.

I mean, that phrase, have not province, gets thrown around a lot. That would be wiped off the books, right? Well, yeah, I mean, that's an equalization thing and kind of poorly understood. Like, Newfoundland hasn't gotten equalization for a long time because of its oil thing. But yes, you know, it would end that. It would create this sort of prosperous, because there's only 525,000 people. This is the

other thing. So a billion dollars a year goes such a long way. The challenge you're going to have, Matt, is unions, institutions, business groups are all going to want a piece of this. And they've got to resist the temptation with an election coming to just kind of like do a bunch of things that are politically popular rather than what needs to be done right. And, you know, Fury is a surgeon. He's an orthopedic surgeon. So he understands the value of stopping the bleeding and fixing the problems. And he needs to do that with the government right now. Can I ask you about the election? He expressed dismay that I would have brought up political timing in this, not just in Newfoundland and Labrador, but in Quebec as well. What do you make of the timing of this with an election coming up?

Well, the timing is interesting because of the election, but you've got to look at in the long term picture, the horizon is what really matters. This may be the only window of opportunity they have to get this done. Because as you said to the Premier, Francois Legault's political fortunes are in free fall. The Parti Quebecois is the frontrunner there. They're already out coming against this and criticizing it. Can you do a deal with a separatist government? Would the climate even be possible? Would the trust factor be there? Because Legault and Fury have built this very close personal relationship where they kept all of this quiet and all of this confidential. There was none of the drama and the big dramatic gestures that we've seen in past negotiations.

And that's what led to this. The only real public display on this was when Legault went to St. John's, acknowledged the deal was bad, and said there's a chance here for a fresh start, which is what this is. There's no redress for the past, but there's real hope for the present and the future.

What I asked Fury last night on my show multiple times is whether he will call a snap election on this. He wouldn't say no. He just says there has to be an election in 2025 at some point. How he manages this, whether he looks to be using this purely for his own political advantage, could squander some of the goodwill that's out there, and they still got to get the commercial deals done.

So don't waste the time being political. Use the time to be productive. I'll let you go, but could you have imagined something like this? Are you one of those people who thought this is hard to believe? When Legault said in February of 2023, the deal is bad, I get it. We can make it better. I had hope, but I wasn't optimistic. There's some optimism today. I'm really glad to have the chance to talk to you about this. Thanks for taking time. Thanks, man. Appreciate it. David Cochran is the host of Power and Politics here on your CBC. For more CBC podcasts, go to cbc.ca slash podcasts.