November 1996
By Barry Stagg
Churchill Falls : The political history of a fleecing
Churchill Falls as the embodiment of Newfoundland humiliation has its unfortunate beginnings in the grandiose dreams of Joey Smallwood circa 1952. The first Newfoundland premier proposed and consummated a virtually medieval concession of mineral ,land and water rights in Labrador to a consortium of British financiers operating ultimately as Brinco Limited. Churchill Falls was part of that feudal grant. The agreement was completed on March 11,1953. Less than four years into Confederation, Smallwood had already set the foul foundation for Newfoundland's descent into financial bondage.
Developing the huge project then known as Hamilton Falls was the central aim of the Brinco partners. To start what was to become the world's largest hydro-electric project required the agreement of Quebec to the transfer of the power over its land. In the 1950's negotiations with long time Quebec premier Maurice Duplessis went nowhere principally because Duplessis linked the project directly to a demand to change the Labrador-Quebec border in Quebec's favour. Duplessis was bent on overturning the 1927 court decision which had awarded Labrador to the nation of Newfoundland and which had rejected the Canadian claim to the territory.
When the Liberal government of Premier Jean Lesage took power in 1960 serious negotiations began. From 1961 to 1966 Quebec negotiated with Brinco and Newfoundland. Brinco was in the position of owning the development rights to the project and was treated by Smallwood as Newfoundland's loyal and patriotic agent in relation to Quebec. His perception was naive in the extreme.
Brinco's goal was to develop this huge project at a profit. Thus it appears that Brinco executives played a pivotal role in 1966 in convincing Smallwood that selling all of the power to Quebec at the Labrador border did not present Quebec with a windfall opportunity. On that basis Smallwood held off on a Newfoundland plan to request that the federal government take over responsibility for the development. In effect he dithered on asking Ottawa to declare the project as one being for the general advantage of Canada. This declaration if made would have made Churchill Falls a development on a par with the Trans-Canada Pipeline and the St. Lawrence Seaway. Federal expropriation powers used so ruthlessly to build the Pipeline would have created a federal power corridor across Quebec.
Smallwood decided not to bring in the federal government and miraculously a few days later in October 1966 the new Quebec premier Daniel Johnson (Sr.) agreed to the deal proposed by Brinco and Newfoundland. On October 13,1966 the deal was signed formally between Churchill Falls (Labrador) Company and Hydro Quebec. That deal gave Quebec the output of Churchill Falls at the border with no restrictions on Quebec's basic right to resell to its own customers. The price was set for forty years at 2.5 mills per kilowatt-hour initially with the price going down to 2.1 mills over the life of the contract. Later refinements to this deal in 1967 gave Quebec an added twenty-five years of fixed priced power at a mere 2.0 mill rate.
The construction project went on in gargantuan fashion while the final contracts were settled. In May 1969 the contracts were signed giving Hydro Quebec the unimpeachable right to buy Churchill Falls power at fixed rates for sixty-five years. The Supreme Court of Canada has ruled in recent times that this contract is valid. Quebec sells the power to the Americans and obtains an annual profit ranging from 400-900 million dollars.
The agreement to allow Hydro Quebec to purchase the power at the Labrador border is essential to the predatory nature of the Churchill Falls contract. This was apparently agreed to early on, possibly as early as 1965 by Smallwood. Quebec through Premier Lesage and his chief cabinet minister Rene Levesque never deviated from that position.
Brinco's leader in the negotiations with Quebec from 1963 on was highly connected Liberal Robert Winters. Winters had been a federal Liberal cabinet minister until defeated in 1957. In 1965 he would be re-elected and would be re-appointed to Prime Minister Pearson's cabinet. In the interim he had the ear of every important federal Liberal from Pearson through to finance minister Walter Gordon.
Philip Smith in his 1975 book 'Brinco: The Story of Churchill Falls' indicates that Winters made it known to the federal government probably through overtures to Walter Gordon that one of the ways to resolve the impasse between Newfoundland and Quebec was to have the federal government in effect expropriate a transmission line across Quebec. The power corridor would have been created in the same way that pipelines, railways, federal highways and the St. Lawrence Seaway had been forced through by the federal government for the general advantage of Canada. According to Smith it would appear that Winters also made overtures directly to Prime Minister Pearson. Smith attributes a position of "friendly neutrality" to Pearson with respect to the Churchill Falls dispute.
Such "friendly neutrality" might be contrasted to the active hostility that the federal government showed toward Newfoundland in the Hibernia development where it essentially confiscated the oil fields. However neutrality aptly describes the federal role in the overall direction and stewardship of the off-shore fishing resource. Its abuse and neglect of the regulation of this industry resulted in economic obliteration. It wimpishly accepted an open hunting season on all fish for any nation of the world that could sail a rusting tub onto the Grand Banks.
The politics of Churchill Falls is bitter and treacherous. The federal Liberals abandoned Newfoundland on this immense project. Newfoundland was left to be mauled by the ego-maniacally incompetent Smallwood and the twin predators of corporate Brinco and nationalist Quebec. The Liberals lacked the guts to take on the Quebec separatists. Instead they bought into the grotesque Quebecois shtick of Pierre Trudeau.
For thirty years Canadians have been appeasing Quebec. Thirty years ago on October 13, 1966, Newfoundland paid the biggest price of all. Then and now the "national interest " includes Quebec and clearly excludes Newfoundland. Newfoundlanders are entitled to sign up for Brian Tobin's cheerleading team.