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November 17, 1999
(Mines and Energy)

The following statement was issued today by Roger Grimes, Minister of Mines and Energy. It was also read in the House of Assembly:

I am pleased today to provide an update on the Churchill River Power Project.

On March 9, 1998 Premier Tobin and Premier Bouchard announced that their respective utilities, Newfoundland and Labrador Hydro, and Hydro Quebec, would negotiate the details of a Memorandum of Understanding for the development of an additional 3,000 to 4,000 MW of power from the Churchill River. The proposal included several components: diversion of two rivers from Quebec into the Smallwood Reservoir in Labrador; construction of an new 1,000 MW generation station next to the existing facility at Churchill Falls; a 2,264 MW generating station at Gull Island and associated transmission lines in Labrador and in Quebec. They also agreed to study the feasibility of developing 800 MW at Muskrat Falls. The final component, a transmission line to the island from Labrador, was to be negotiated between the Government of Canada and the Government of Newfoundland and Labrador.

Since March 9, 1998 the utilities have conducted detailed financial and engineering work on each of the component parts. In June of this year, Newfoundland and Labrador Hydro, and Hydro-Quebec agreed to divert only one river rather than two. It was also agreed to increase the utilization rate of the existing 11 generators at the Churchill Falls facility rather than build any new ones. A new 2,264 MW generating station will be built at Gull Island, as well as the necessary transmission lines in Labrador and in Quebec.

The new configuration now under negotiation will deliver essentially the same amount of energy, but reduce the costs to the province. It will mean increased profits. And it will mean fewer environmental effects, since the project no longer includes partially diverting the St. Jean, a major salmon river in Quebec.

We are continuing to study the feasibility of developing Muskrat Falls. The most recent financial analysis suggests Muskrat Falls is marginally viable. We will not commit to a development at this time, but we are leaving it open as an option for the future.

This time, there will be no upper price limit, and revenues will reflect market prices. We will ensure a progressive royalty regime that will increase with project profitability, as opposed to the fixed royalty regime in the Upper Churchill contract.

This time, Newfoundland and Labrador's exposure will be limited. We have secured a price floor from Hydro-Quebec for energy being sold in the US and Canadian energy markets. The price floor will ensure that no matter how low market prices go, the project will receive sufficient revenues to ensure repayment of debt incurred to finance the new construction.

In the meantime, and unrelated to the construction project, we signed a three-year agreement with Hydro-Quebec to recall 130 MW of power for a total of $78.9 million. The province has already received about $60 million in revenue from that total. When the contract expires in 2001, we will be in a position to renew the agreement with Hydro-Quebec or find the best alternative use for this power.

In June, the boards of Newfoundland and Labrador Hydro, and Hydro-Quebec approved the Guaranteed Winter Availability Contract and CF(L)Co Shareholder's Agreement. GWAC is proof of Hydro-Quebec's commitment to fixing the financial situation of CF(L)Co. GWAC will provide an additional $1 billion from Upper Churchill power for the province over the life of the contract.

We are committed to a thorough, single environmental assessment for this projectBone that is similar to the Voisey's Bay environmental assessment.

Since the March 9, 1998 announcement, we have developed a positive working relationship with Innu Nation, and they participated in both the 1998 and 1999 environmental field programs. The utilities continue to consult and invite all affected Innu communities in Labrador and Quebec to the table, and are moving forward with Innu Nation and Natashquan on the project. They have adopted an open door policy to enable other Innu communities to join the negotiations when they are ready.

We are continuing discussions with the federal government on the infeed to the island. Engineering studies have confirmed the project will cost about $2.1 billion, which the province cannot absorb on its own.

We have made significant progress. We are committed to working with affected Aboriginal groups and ensuring a thorough environmental assessment for this project. We are committed to ensuring value from our resource. And we are committed to getting the best deal for the people of this province.

Negotiators continue to meet regularly in an attempt to resolve matters to the mutual satisfaction of both partners. A full report will be provided to the two premiers at a meeting slated for December 10, 1999, here in St. John's. Further details, as well as the expected date for signing of a MOU will be available following that session.

1999 11 17 2:25 p.m.

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