A history lesson on the river: Muskrat Falls inquiry looks to the past, and into the future

The Muskrat Falls inquiry forayed into the past Wednesday, looking back at the contentious history of hydroelectric development on the Churchill River.

Examining everything from the long-running battles with Quebec over market access and lopsided hydro deals to the strategy that eventually gave us Muskrat Falls.

But the commission also got a glimpse of the current situation with a detailed explanation of the controversial Muskrat Falls hydroelectric project from Nalcor CEO Stan Marshall.

The commission led by Justice Richard LeBlanc is examining the decision to sanction the project nearly six years ago, and the subsequent cost overruns that have seen the full budget increase from just over $7 billion to nearly $13 billion.

The project is also years behind schedule.

But to get a sense of how we reached this point, the inquiry heard from historian Jason Churchill, who has studied the Churchill River in Labrador for many years.

Churchill is an expert on efforts to develop the river's hydro potential from the time of Confederation up to 2007, the year then-premier Danny Williams unveiled a new energy strategy.

That strategy eventually led to the sanctioning of Muskrat Falls in 2012, which will allow the province to bypass Quebec and transmit power from Labrador to Newfoundland, and onward to Nova Scotia along the newly constructed Maritime Link.

Churchill would not say if he believes the gamble will pay off.

"It's too soon to say," he told reporters following his presentation.

Churchill explained there are two issues that have dominated discussion about the river since the 1960s: market access for Labrador power, and the lopsided 1969 contract to develop the Upper Churchill project that sees massive profits flowing to Quebec.

And not much has changed today, despite circumstances such as multiple energy crises, and growing concerns about climate change and the environmental appeal of hydro power.

"None of these external factors have managed to budget those two key issues that have always dominated negotiations on the Churchill River," he said.

Labrador is rich in hydro potential, but is geographically isolated from energy markets.

The Atlantic ocean forms its eastern border, and Quebec looms large along its eastern and southern border.

From the outset, attempts to transmit Labrador power through Quebec and into markets in eastern Canada and the northeast United States have been thwarted.

And pleas for Ottawa to help have been unsuccessful, with federal governments of all political stripes saying market access is an inter-provincial matter.

"Quebec's position was firmly established by Quebec premier Jean Lesage in 1965 when he stated that Quebec would never allow a transmission line through its territory and that any electricity that ever entered Quebec territory would, quote, 'become property of Hydro-Quebec," Churchill told the inquiry.

The Upper Churchill contract, which expires in 2041, is a legacy of that position.

Most of the 5,400 megawatts generated is sold to Hydro-Quebec at very low rates, and is re-sold at a big profit.

Successive governments in Newfoundland and Labrador have tried to change the contract, but with very little to no success.

And even when the contract expires, Churchill says there are no guarantees things will change.

It's conceivable in 2041 that the province will be in no better position to negotiate access to the markets .. than it had been in the 60s or any decade since.- Historian Jason Churchill

That's because the power lines that bring Upper Churchill power to the market are owned, operated and maintained by Hydro-Quebec.

"It's conceivable in 2041 that the province will be in no better position to negotiate access to the markets .. than it had been in the 60s or any decade since," he said.

And efforts to develop other hydro dams on the river, including Gull Island, went sideways after Quebec continued to insist that it must be the sole broker for electricity transmitted through its territory.

This roadblock was a driving force in the bold strategy to develop Muskrat Falls in its current form.

The project has been labelled a boondoggle in the past by Stan Marshall, who took over what he says was a project in crisis two years ago, and is still being described by critics as a threat to the province's financial future.

But for now Marshall is focusing on finishing the project, which is more than 90 per cent complete, with first power expected in late 2019, and full commissioning a year later in 2020.

"There are issues," Marshall said Wednesday. "There always are issues when you have a project this size. There are some serious concerns. We're working through them."