Political gamesmanship in

Newfoundland and Labrador

could derail what two Quebec energy experts describe as a

great deal to secure fairer returns

from

Churchill Falls

and move ahead with developing the massive Gull Island

hydroelectric project

.

Pierre-Olivier Pineau,

HEC Montréal’s

chair in

energy sector management

, said Newfoundland and Labrador’s Conservative Party has turned the proposed agreement into a political weapon.

“I think the Newfoundland and Labrador Conservative Party just used the new deal as a tool to criticize the Liberals,” Pineau said. Being critical of a

deal with Quebec

is an easy target the government couldn’t resist, given the province’s negative reputation in Newfoundland, he added.

“I haven’t heard any substantial argument against the deal… Their message has been basically, ‘we need to study it and people have to vote for it.”

The proposed Churchill Falls–Gull Island Memorandum of Understanding, signed in December 2024 by then-Liberal premier Andrew Furey and Quebec Premier François Legault, establishes a partnership between Newfoundland and Labrador Hydro and

Hydro‑Québec

to replace the controversial 1969 Churchill Falls power contract, which will expire in 2041.

Under the new 50-year deal, Newfoundland and Labrador would receive 5.9 cents per kilowatt-hour — about 30 times more than under the original deal. That means the Atlantic province could see its annual hydro revenue jump from about $100 million to roughly $1 billion.

The deal would not only advance a massive new hydroelectric development, but also provide Newfoundland and Labrador with a potential financial lifeline as it confronts a net debt of nearly $20 billion — the highest per capita in the country.

Pineau said the framework of the deal is “as good as it could be,” offering the long-term certainty needed for large-scale hydro development, and benefits both provinces.

“The benefits for Hydro-Québec are clear: securing the current supply from Churchill Falls beyond 2041 and developing new capacities at a competitive cost,” he said. “The benefits for Newfoundland are clear: it means a much better price starting as soon as the deal is signed — which could be in 2026 and would be worth billions.” The province would also get a share of new generation without taking on the development risk, he said.

The agreement also paves the way for significant new hydro developments on the Churchill River. The proposed Gull Island project, a 2,250-megawatt facility, is expected to be operational by 2034 or 2035 and reportedly produce enough electricity to power about 1.5 million homes.

The existing Churchill Falls generating station would be expanded, with a new powerhouse adding 1,110 megawatts of capacity by 2035, while upgrades to existing turbines are projected to boost output by another 550 megawatts between 2028 and 2038.

Newly elected Premier Tony Wakeham has reaffirmed his commitment to subject the Churchill Falls and Gull Island agreement to a public referendum and an independent review before any final deal is signed.

Wakeham argues that Newfoundlanders deserve full transparency before committing to another long-term contract with Quebec, referencing the province’s lingering resentment over the original 1969 Churchill Falls agreement, which left Newfoundland locked into decades of low-priced power sales.

Under the deal, Newfoundland and Labrador will remain the majority owner in the new projects, while Hydro‑Québec will have a significant minority stake. The Atlantic province could receive immediate cash flow, long-term royalties and access to low-cost energy for industrial development. The agreement also commits to upgrades at Churchill Falls and positions the province for up to $200 billion in economic benefits over its lifetime.

Negotiators face a tight timeline: the non-binding memorandum requires a final agreement by April 2026, leaving only six months to settle key details such as pricing, risk-sharing and potential off-ramps. There’s also a possibility the government could change in Quebec, further complicating a potential deal. Legault is heading into what may be his final year in office, with a provincial election set for October 5, 2026.

Pineau argues that few realistic buyers exist for the roughly 30 terawatt-hours

 

of annual power expected from Churchill Falls. Options like new transmission lines to Ontario or the United States, an aluminum smelter or a hydrogen plant would each cost billions and pose risks too high for investors to take on.

If the deal collapses, Pineau warned, Newfoundland would be the real loser, while Quebec would still enjoy 15 more years of cheap electricity under the existing contract.

Newfoundland and Labrador Conservative Senator David Wells has joined those demanding a detailed review of the MOU. He voiced concern that the preliminary agreement grants Hydro-Québec a 40 per cent ownership stake in the Upper Churchill operation as part of the Gull Island development.

Wells argues that the public needs to understand what’s at stake with the proposed partnership and that his concerns go beyond power prices and include “ownership, control, and ensuring Newfoundland and Labrador finally gets a fair deal from its resources.”

Wells supports the premier’s plan for an independent assessment before the province commits to binding terms.

François Bouffard, associate professor of electrical and computer engineering at McGill University, said the MOU offers enormous upside if executed properly.

“From a finance perspective, this is a very sweet deal,” Bouffard said, providing immediate cash flow, which Newfoundland urgently needs, and positions the province to benefit from decades of clean energy production.

The province has already attempted to develop the Churchill River through the Muskrat Falls project, led by the Crown corporation Nalcor Energy Ltd. The project proved disastrous — it was completed in 2023, years behind schedule and ran more than $7 billion over budget. Its mounting costs eventually prompted a $5.2-billion bailout from Ottawa. Partnering with Hydro-Québec would help eliminate many of these financial and project-management risks, said Bouffard.

“I think the people of Newfoundland and Labrador need to understand that, if for some reason — like in the case of Muskrat Falls — there are serious geotechnical issues with the new site, well, it’s going to be coming out of Hydro-Québec’s pocket, not Newfoundland and Labrador’s. So, it’s a give and take,” he said.

Bouffard said working with Hydro-Québec provides access to the capital, expertise and transmission corridors required to make Gull Island feasible.

“Passing through Quebec is the only efficient way to do this,” he said. “Hydro-Québec has the manpower, experience and infrastructure to make it work.”

Critics in Newfoundland have complained that the proposed sale price — about 5.9 cents per kilowatt hour — is too low. Bouffard counters that the pricing is reasonable, given Hydro-Québec’s investment risk and control of the transmission network. The deal also includes a price escalator, meaning Newfoundland and Labrador’s revenue from electricity sales would increase over time, based on market‑linked pricing.

“Of course, Quebec will resell the power at a higher price,” he said. “There has to be a premium for the risk they’re taking and the cost of transmission. Newfoundland could invest in the transmission itself if it wants a bigger share — but that would require billions more. You can have the greatest resource but if you can’t get it to market, what’s the point?”

Bouffard cautioned that any delay could jeopardize the project.

“These are massive projects that depend on specialized labour and scarce equipment,” he said. “The global supply chain for energy infrastructure is already strained. Even a six-month delay could mean losing access to contractors or materials. Time is money.”

Despite the political noise, Bouffard believes the agreement could deliver significant economic, environmental and social benefits for Newfoundland and Labrador.

“This has been an emotional issue for Newfoundlanders for so many years and that’s understandable,” he said. “But partnering with Quebec in a carefully negotiated, transparent deal is the most realistic and beneficial path forward.”

  • Vancouver is Canada’s shipping giant, but trade flows may be shifting east
  • Trump’s war on wind seen blowing investors towards Canadian megaproject

• Email: arankin@postmedia.com