Speaking Notes
Premier Kathy Dunderdale
The Canadian Club of Toronto
Royal York Hotel, Ballroom, Toronto
December 3, 2012
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Powering a Sustainable Economy
Last Friday evening, after travelling to Happy Valley-Goose Bay, Labrador, my flight was descending toward St. John’s and I couldn’t help but marvel at the vast field of lights spread out below me, curving away to the horizon.
Astronauts such as Julie Payette have riveted audiences with descriptions of the views from much farther out than any of us have been. At night, our continent is ablaze with light, from St. John’s to Victoria, from Ontario to the Gulf of Mexico. What is fueling this amazing light show?
The mix, of course, has quite the spectrum of its own: oil, natural gas, coal, biomass, wind, solar, geothermal, nuclear, and hydro.
With growing awareness of the reality of climate change, we have been talking more and more in recent years about the importance of reducing energy usage – and I agree that conservation is a principle we all should embrace.
But let’s also be realistic.
We are not going back to the day when North America at night from space would have been a field of darkness if anyone had had the means to see it. Our thirst for technologies and the energy that fuels them is continuing to grow. The choices we make have implications, of course. We may well be driving climate change with the fuels we burn, and climate change may well be at the heart of significant weather events that have been dominating the news of late.
When Sandy plowed into the eastern seaboard a few weeks ago, we witnessed the devastation that can occur when nature deals us a broadside blow.
Collectively, we shivered as we saw images of families hunkered down without electricity to heat their homes or power the many devices on which families rely, from refrigerators to stoves.
I marvel at how my own grandparents and great-grandparents were able to survive without the conveniences that electricity affords us today.
These days, we can barely imagine life without electrical power. We take it all for granted until it’s taken away by natural disasters, rolling blackouts or brownouts. In the heat of summer here in Toronto, when air conditioners are on bust, you know just how fearsome the threat of a blackout can be. A lack of electrical power can cost people, not only their comfort, but also their lives.
Ensuring we can meet our power needs – whether in our homes or in our hospitals – is absolutely vital in modern society. We have to be ready, in particular, for those days when extreme heat or extreme cold max out our demand for power, because it is on those days that not having enough power could mean people will die.
On the Island of Newfoundland, which has an isolated power generation system, the demand for electricity is about to surpass the supply. As our economy continues to grow and our people continue to prosper, the demand is tracking consistently upward. At times of peak demand, we rely very heavily on electricity generated by burning imported oil at a thermal generating station on the east coast. This facility is among the worst polluters in eastern Canada. To keep the station running, we will need to invest hundreds of millions of dollars to install scrubbers and precipitators to clean the emissions, and not long thereafter, we will need to spend even more to replace the aging facility altogether.
If we make these investments, we will continue to be reliant on imported oil and vulnerable to the commodity’s volatile price fluctuations. Closing this generating station is something our government has committed to do.
But how, then, do we meet the growing demand for power
Energy supply in Newfoundland and Labrador
Our province’s publicly owned electricity generating utility, Newfoundland and Labrador Hydro, has a legislated obligation to forecast our province’s energy needs and identify the least-cost means of meeting those needs. In fulfilling its obligation, Hydro initiated a far-reaching examination of all the options, kick-starting a process that has led to one of the most thorough analyses of energy supply and demand in our province’s history. And what we have discovered, in the process, is very exciting.
When it comes to energy, Newfoundland and Labrador today is in an enviable position.
We have significant fields of oil and gas off our shores in almost every direction. Our wind energy profile is among the most attractive in the country. We have considerable tidal power potential, geothermal potential, combustible biomass and reserves of uranium. And in Labrador, we have one of the most impressive undeveloped hydropower resources on the entire continent at two sites along the lower Churchill River. It is not without cause that our province is being described today as eastern North America’s energy warehouse.
Using Energy to Power Economic Diversity
We have known about our vast undeveloped potential in Newfoundland and Labrador for a very long time. It is not only energy.
The province is a treasure-trove of minerals, spanning the gamut from nickel, copper and cobalt to zinc, antimony, fluorspar, gold, valuable rare earth elements and, of course, iron ore. Labrador has among the richest iron ore deposits on the continent. At the same time, exploration work is continuing at other sites where a range of other minerals have prospectors salivating.
Our vision is to utilize our province’s energy sources to grow industries that can sustain our economy for generations to come.
For example, we are ready to take economic diversification efforts to the next level by capitalizing on our strategic advantages as the natural staging ground for research and development activities in the Arctic.
It is from our shores that, a century ago, a young navigator from our province, Captain Bob Bartlett, piloted the first-ever human expedition to the North Pole.
We were the natural staging ground for Arctic ventures then, and we are even more prepared now to take the lead in advancing Canada’s presence in the far North.
With energy on tap to fuel both traditional and emerging sectors and to power the infrastructure they rely on, we will be able to ratchet up our economic activity to a level that, in Newfoundland and Labrador, is not only unprecedented but also sustainable over the long haul. We are not interested in being a flash in the pan. Our goal is long-term economic and environmental sustainability.
There is an Iroquois principle about thinking ahead seven generations. That is the kind of thinking that has been shaping our approach from day one.
What We’ve Accomplished
When our administration was first given the privilege of governing in 2003, we knew what needed to be done.
It was time to get a handle on all of our strengths and chart a course from where we were to where we would need to be to have all of those strengths functioning together for success. We knew we had the energy resources. We knew we had the mineral resources. We knew we had the human resources. We had students eager to learn and a labour force eager to engage.
We knew that achieving success would require bold and realistic strategic planning.
So we set to work on a range of strategic plans, sector by sector – economic and social.
We were especially concerned with developing our province’s first-ever comprehensive energy plan, a strategy to make the very most of our energy warehouse.
That energy plan was developed and released in 2007, and since then, we have been focusing on making it work.
Today our province’s economy is thriving like never before, and remains one of the most robust in the country.
The Canadian Federation of Independent Business has just reported that small business owners in Newfoundland and Labrador are now the most optimistic in Canada.
We have seen a rise in housing starts, employment, retail sales, weekly wages, investment growth and a host of other economic indicators.
In fact, Newfoundland and Labrador’s economy continues to lead the country in increases of average weekly income and investment growth. Capital investment is on track to rise by another 30 per cent this year to $9.6 billion – a level unprecedented in our province’s history.
In so many other sectors of our economy, our story is one of strength, born from a vision of what could be and the willingness to work hard for the maximum benefit from our resources. It is also a story of moving from the position of strength gained as we developed our non-renewable resources for our benefit, to a greater, lasting strength based upon a prosperous, infinite renewable-resource-based economy.
Newfoundland and Labrador, in the last five years, has experienced nothing less than a sea change — a fundamental shift in our place in the federation.
Our success is not a flash in the pan. It is the new reality, and we have only just begun to tap the opportunities.
We are determined never to return to the era when there was little to live on but vague hopes of some distant “someday” decades down the road.
This is the new Newfoundland and Labrador, and we are determined to strike while the iron is hot so the growth continues!
The Challenge of Quebec’s Blockade
However, as we considered our options of economic diversification and development, there was one massive challenge in our path, and we were determined to find a way to deal with it. As many of you know, a dark shadow hangs over our province’s relationship with Quebec.
Perhaps all of you have heard of the infamous Upper Churchill Contract under which Hydro-Quebec has been paying obscenely low prices for Labrador power that it then resells to its customers at an incredible profit.
To date, the Upper Churchill project has generated more than 20 billion dollars in net revenue in Quebec. Newfoundland and Labrador has received only about one billion dollars. The vast majority – about 95 per cent – has gone to Quebec.
But as if all of this were not shameful enough, it is only half the story.
To understand the situation, you first need to imagine the geography of eastern Canada. Newfoundland is, of course, an island, entirely disconnected from the mainland of the continent.
Labrador, however, is also effectively an island of sorts. There is no land route from Labrador to jurisdictions beyond Quebec except through Quebec.
Quebec is continuing to treat its border with Labrador as a blockade when it comes to energy exports. Canada has many energy projects within its borders and it is essential that the development of those projects not be hampered by artificial boundaries. To ensure we have energy security, energy must be able to move across this country and not be held hostage by geography.
Crossing Labrador from west to east is a lengthy body of water called the Churchill River. Along its route, the river goes through a series of drops before emptying into Lake Melville in the east.
It is in the western part of the river that the Upper Churchill hydro project was constructed in 1967.
It was the largest underground power station in the world and is today the second-largest hydropower facility in Canada, capable of generating some 5,428 megawatts of power.
On the river’s eastern or “lower” end, there are two other sites ideal for power generation. One is Gull Island, a series of rapids with the potential to generate some 2,000 megawatts; and the other is Muskrat Falls, with the potential to generate some 824 megawatts. Together, these sites represent the best undeveloped hydropower sites in North America.
Their power would be renewable, sustainable and environmentally friendly.
We have long been interested in developing these sites to fuel development in Labrador and to export any power that might be excess to our immediate needs. For instance, our clean, renewable and readily available hydro-electricity could satisfy the ever-growing energy demand right here in Ontario. However, Quebec has consistently stood in our way.
As a vendor of electricity in the United States, Hydro-Quebec is bound by American law to open its grid to fair wheeling of electricity. Recognizing this obligation, our province applied to access their grid to transmit Lower Churchill power to market.
Quebec, however, has been shamelessly obstructionist, delaying and ultimately denying our application to wheel Lower Churchill power through their province under fair terms. Quebec has, in effect, erected a barrier to the export of hydropower from Labrador.
The bottom line for Newfoundland and Labrador is that the hydropower potential of the lower Churchill River has continued to flow uncaptured into the sea, decade after decade despite the demand, all for want of a route for that power to market.
One province should not be able to deny a fellow province the opportunity to develop its natural resources and grow its economy.
Importance of a National Energy Plan
Surely it’s time to address this head-on with some frank talk about the need for fair energy transmission in this federation. Surely all of us would benefit and be stronger if we could find a way to cooperate more effectively on east-west energy transmission.
That is what makes energy discussions at the Council of the Federation so important. They are necessary so we can understand one another, what our perspectives are, what our values are. And it's not just about oil, although we know oil is extremely important. There are challenging conversations to have about all energy in this country and how we transport or wheel energy.
The development of the Lower Churchill in Newfoundland and Labrador, is unfolding in a great collaboration between Newfoundland and Labrador, Nova Scotia and the federal government.
It is an example for the nation of a partnership facilitating the kind of development, which will have an enormous impact in our province, in Atlantic Canada, and the country.
This kind of collaboration is required across the country if all Canadians are to benefit from the country’s energy resources. Newfoundland and Labrador chaired the drafting of the 2007 COF Energy Plan.
At the beginning of that process, just about everybody in the country told Newfoundland and Labrador that we wouldn't be successful. We were. We developed a great strategy.
It's the most downloaded document from our COF website, and it was a great collaboration amongst provinces and territories in this country. But that doesn't mean it's always easy or that there's a straightforward path.
But as responsible Premiers and good stewards, it's incumbent on us to have those conversations.
We need to have the positive discussions about energy, but we need to have the challenging ones as well, and we have to find a resolution.
Game-changing Partnership
But frankly, in Newfoundland and Labrador, we have been talking about these issues for a very long time and we simply don’t have the luxury of waiting.
Nor can we remain burdened by the mistakes of the Upper Churchill contract. The choices we have made with the Muskrat Falls development demonstrate that we control the agenda, now and in the future. We will never rise to the level of our potential by waiting for the stars to align in our favour. If one route is blocked, then we must find another.
Here is where the story gets quite interesting. When Newfoundland and Labrador Hydro crunched the preliminary numbers in seeking the best new power source for the island, something very intriguing turned up.
The least-cost means of meeting the growing electricity demand on the island of Newfoundland was to develop the smaller Muskrat Falls hydro project in Labrador on its own and transmit the power by cable under the sea to the island. It turns out that this option would be less expensive than importing oil, less expensive than either importing or developing natural gas, less expensive than wind power and preferable to any other option or combination of options.
Even though Muskrat Falls is the smallest of the undeveloped lower Churchill projects, it would still leave us with more power than we would need for a period of years. So we wondered: what might we do with the excess power? We could use some of it to attract new industrial customers to the province. Absolutely – and we certainly intend to do that. But that would still leave considerable excess power for a period of time.
Getting the surplus power to market through Quebec was not an option, because Quebec was blocking us. Might there be another route to market?
If we were bringing power under the ocean to the island, might it also be feasible and profitable to send surplus power under the ocean from the island to Nova Scotia?
For a number of reasons, we believed that idea was worth exploring.
So, we set the province’s energy corporation to work. Nalcor Energy – our province’s publicly owned energy corporation – entered into talks with Emera Energy of Nova Scotia, which is that province’s publicly traded, private-sector utility. When they had their experts take a serious look at the proposal, the results were clear. The numbers worked. It turned out to be a sound proposition, both technically and economically.
Not only was it sound, but it was also a game-changer. By doing this, for the first time in our history as a province, we would have an export route for hydropower bypassing Quebec, enabling us to escape the stranglehold Quebec had placed on our energy development efforts.
The Maritimes would have access to a brand new source of clean, renewable energy. We would have access to Emera’s electricity grid. This would open up an entirely new east-west energy route in eastern Canada. It would enable Nova Scotia to achieve greenhouse gas reduction benefits by converting from coal-fueled power to hydropower.
Bringing on stream a significant new hydropower resource would also enable Canada to home in on its greenhouse gas reduction targets.
And, of course, it would enable our province to retire a major polluter and meet our growing energy needs using clean hydropower. On so many levels, it soon became clear that this was an initiative worth pursuing.
Project Scrutiny
In the two years since Nalcor and Emera announced and initialed their agreement in the fall of 2010, the Muskrat Falls project has undergone more scrutiny than any other project in our province’s history.
It has been reviewed by our province’s Public Utilities Board, which in turn hired Manitoba Hydro International to conduct a thorough independent expert analysis, and MHI in turn endorsed the project.
Nalcor hired Navigant Consulting, another major player in the energy sector, and Navigant also endorsed the project after careful analysis.
Nalcor hired Ziff Energy of Calgary, which confirmed the superiority of this proposal to the natural gas options put forward as alternatives.
Nalcor and the province also commissioned analyses of virtually every other option, including wind power. The problem with wind power is that it needs a backstop – a backup power source for those days when the wind is either too weak or, paradoxically, too strong to provide a reliable flow of power. Wind alone is not an option. Muskrat Falls is less expensive to consumers than wind power, and that makes it preferable.
All of these studies have been publicly released.
Federal Government Support
The Government of Canada not only endorsed the project, but did something more.
Prime Minister Harper said a project so clearly in the national interest merits national support. The Prime Minister’s steadfast commitment to this region-building project culminated last week in the signing of final documents in which the Federal Government agrees to underwrite the financing for the project.
The support of the Prime Minister demonstrates the kind of leadership the Federal Government can provide in region building energy projects such as the Muskrat Falls development.
The guarantee means ratepayers in our province will pay even less for power than they would otherwise have had to pay.
The Path Forward for Newfoundland and Labrador
Energy is not just another commodity in Newfoundland and Labrador. It has become a defining commodity, no less important to our history and our future than fish.
Energy has given us among our most bitter disappointments on the Upper Churchill and among our greatest triumphs, as we secured a stronger Atlantic Accord and broke free of equalization. With wind, oil, gas, and of course hydro, we are one of North America’s true energy superpowers—a vast warehouse of untapped opportunity. The energy choices we make today will determine the economic opportunities we enjoy tomorrow, and that has implications for all of Canada.
Our government’s comprehensive energy plan charts a responsible course forward to prosperity.
Ours will be a diversified energy economy, with power we can draw on, not just until the wells run dry, but in perpetuity, generation after generation after generation—power that will pour wealth and opportunity into our economy to sustain our grandchildren and their grandchildren.
The Muskrat Falls project is the next step toward that economy. What is at stake is nothing less than the economic self-reliance of Newfoundland and Labrador.
An open conduit for renewable energy would give us an unprecedented open pathway for exporting our surplus power for profit until we can use that power for industrial expansion at home.
We would have the time and the means to attract new industry and new growth for our communities.
We would have the time and the means to pursue new opportunities to build a strong and enduring economy where industries can thrive and employment can grow.
This is why Muskrat Falls development truly exhilarates me as the Premier of Newfoundland and Labrador. It takes our greatest hopes for the future and secures them in solid bedrock.
Planning for a Bright Future
There are always some who are too quick to give up on a brighter future. They think small and plan only for the worst.
I look into the faces of my grandchildren and I know how much they are counting on me and on all of us not to lose faith in the future they are waiting to inherit.
Some thought Newfoundland and Labrador was destined to be the poor province, perpetually unable to meet its own needs.
But thankfully, those of us who thought differently were determined to bring our vision to fruition – and having succeeded, we are all the more determined to take our province forward and upward to a higher plateau of sustainable prosperity though a renewable energy-based economy.
Ontario has also had its challenges of late, and its prophets of gloom and doom. But I see before me a group of leaders with the determination to chart a course to something better.
And thank goodness for that, because Canada is strongest when all of its provinces and territories are operating at maximum power.
I love this country. The Americans get all the credit for being tough, but Canada is where you really have to be tough to succeed, and succeeding is something we do very well indeed.
I believe we can find new ways to work together to lift this country even higher, so all Canadians can share in the benefits.
Thank you