Here's to the crazy ones, the misfits, the rebels, the troublemakers, the
round pegs in the square holes... the ones who see things differently -- they're
not fond of rules... You can quote them, disagree with them, glorify or vilify
them, but the only thing you can't do is ignore them because they change
things... they push the human race forward, and while some may see them as the
crazy ones, we see genius, because the ones who are crazy enough to think that
they can change the world, are the ones who do.

Steve Jobs
US computer engineer & industrialist (1955 - 2011)

Monday, May 24, 2010

Quebec - It's time for a new deal for Newfoundland

Hydro Quebec, the two words that have become synonimis with Newfoundlander's sense of their place in Canada. Although I personally believe that is not an accurate statement of the relationship, it is easy to understand why such feelings have developed over the years.

You have to go back to the early days. The devisive debates and then the vote on joining Confederation. A Premier desperate to prove to Newfoundlander's the wisdom of that decision. A province that was economically and industrially empoverished in comparison to the rest of the country. Newfoundland gave a monopoly, not unlike the monopoly Hudson Bay Company once enjoyed to develop the great unknown wealth of Canada, to Brinco - a private consortium to develop Newfoundland and Labrador's water and power potential. While the government in St John's saw the potential to begin the industrialization of Newfoundland, it is clear that Brinco was seeking only to convert the monopoly to profit.

The development of the Upper Churchill, to provide hydroelectric power, became the sole focus of Brinco, and Hydro Quebec it's sole partner. No other potential business partners were available to finance the project and, unlike say Hibernia, the federal government did not step forward with any loan guarantees. That left Brinco at the mercy of Hydro Quebec, and of course Newfoundland at the mercy of Brinco. At a time when Newfoundland needed a hand up to join the more industrialized ranks of provinces, Hydro Quebec turned on her.

The nationalistic Quebec government, using Hydro Quebec as it's instrument of choice, dictated terms to Brinco. Hydro Quebec even came back after the intial agreement was signed and added further prejudicial clauses that essentially left the people of Newfoundland without the benefit of their own resources. The basic hi-lites of the deal being: an extremely low price for the power - even by 1969 standards; automatic renewal clause of the agreement in 2016 that does not even require further signatures; a 37.5% stake in the Corporation that runs the Upper Churchill; construction of almost all the equipment used in the project done in Quebec; transmission lines designed to meet Hydro Quebec's specifications; a 99 year renewable lease on the Upper Churchill; and so it goes. In other words, if you want us to use our money, our loan guarantees, and you want us to buy the power we will take everything. The kind of deal you find abhorant if it were conducted between separate countries, let alone fellow provinces. The irony is that even if Newfoundland chooses not to renew the deal in 2041, Hydro Quebec still gets 37.5% of the profit from any new deal Newfoundland may find.

If that didn't make your blood boil consider this: Quebec has earned approximatley $22 billion on the deal to date. Newfounland has seen $1 billion. Consider that Newfoundland's current debt is $11 billion dollars. If Newfounland would have been even 50 - 50 partners with Hydro Quebec on the Upper Churchill, and recieved half of that 22 billion, Newfoundland would be debt free today. Conversely, the Upper Churchill agreement made Hydro Quebec into the player it is today - doubling its corporate size.

Several Premiers have since tried to undo this "deal with the devil" in the Courts. The lawyers of the day apparently ensured they had every angle taken care of - including a clause stopping Newfoundland from raising taxes on the power until atleast 2016. And, just to cover all their bases, the Quebec government has filed a complaint over the border between itself and Labrador which, if successful, would see Newfoundland lose the Upper Churchill - plant and all. Oh brotherly love.

The answer lies in politics. During the sixties and seventies Quebec sought to become "masters in their own house". Instruments like Hydro Quebec assisted in that effort, but it was politics that allowed the instruments to be deployed. Quebecers instinctively, and through substantial practise, have mastered the art of wedge politics within Canada. Their biggest success in this regard is their ability to not have those same politics used against them. One of the only successful attempts to do so was the recent failure of Hydro Quebec to take over New Brunswick's power utility - a move that some might say eerily resembles the nationalistic expansion policies of Gazprom in Russia.

If the answer lies in politics, then the silver bullet lies in the Constitution. The Government of Newfoundland might as well forget pursuing the Americans for help, as they will likely turn the whole matter on its head for their economic advantage - if they even choose to get involved, which is unlikely. Newfoundland's best hope lies in the Constitution, and more specifically the "notwithstanding clause". Both documents were not even envisioned in 1969. The not withstanding clause allows a province to override legislation, or create legislation, that is within its jurisdiction, but contrary to certain constitutional principles. Ordinarily, I would not advise, nor approve of such a measure. However, the Government of Quebec, as represented by Hydro Quebec, has stepped way over the line in it's treatment of Newfoundland, and by association the good people of Newfoundland and Labrador.

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