Feds step up for Lower Churchill megaproject

The federal government said Friday it will help defray the costs of the controversial Lower Churchill hydroelectric project in Labrador through a loan guarantee.

"It will grow our economy and our status as an energy superpower," Natural Resources Minister Joe Oliver said during an announcement in St. John's.

Plans to tap hydroelectric power on the Churchill River "represent an unprecedented opportunity for Newfoundland and Labrador indeed the entire Atlantic region to produce clean energy," Oliver said.

The loan guarantee will meanthat Newfoundland and Labrador and its partners will be able to finance much of the $6.2-billion project at a lower cost. Officials saidthe memorandum of agreement now needs to be turned into a formal agreement.

The memorandum of agreement follows through on a campaign pledge that Prime Minister Stephen Harper made in March.

Newfoundland and Labrador aims to generate 824 megawatts of power at Muskrat Falls on Labrador's Churchill River and export it to Newfoundland while moving as much as 40 per cent to Nova Scotia and other markets.

Friday's announcement covers the generating plant planned for Muskrat Falls and various "transmission assets," as well as subsea links to carry power from Labrador to Newfoundland and then from Newfoundland to Nova Scotia.

The document says the guarantee will "extend to both the construction and post-construction periods."

Nova Scotia joined request

The Muskrat Falls proposal is being developed by Newfoundland and Labrador, its Crown energy agency Nalcor and Halifax-based Emera Inc., the privately owned parent of Nova Scotia Power. The Nova Scotia government had joined Newfoundland and Labrador in requesting federal support.

The governments last year said they were seeking the loan guarantee as well as $375 million through an infrastructure program to help pay for a subsea link between southwestern Newfoundland and Nova Scotia. A decision on that application has not yet been made.

The project, which would generate 824 megawatts of power, has sparked controversy in Quebec since the power would be routed to markets through the Maritimes, allowing Newfoundland and Labrador to bypass Quebec's borders altogether.

Relations between Quebec and Newfoundland and Labrador have been sour for decades because of the existing Upper Churchill hydroelectric project, in which Quebec buys inexpensive power from Labrador and is able to sell it on the U.S. market.

'The decision is yea'

The final Lower Churchill deal is still contingent on a financial review, although Oliver said federal support is not in doubt.

Oliver, when asked when the government will decide "yea or nay" on Lower Churchill, told reporters, "We have made a decision, and the decision is yea."

Oliver said financial advisers will work on how risk can be reduced.

No dollar figure has yet been placed on the value of the loan guarantee, but Shawn Skinner, Newfoundland and Labrador's energy minister, said the guarantee will be significant.

"The fact that we have a federal loan guarantee results in reduced interest rates, which means lower project costs, which means lower electricity rates," Skinner told reporters. "That's what we want."

A final agreement is expected by Nov. 30, in keeping with a pledge that was made during last November's announcement.

Nova Scotia Energy Minister Charlie Parker said the Lower Churchill project will help weanNova Scotia from itsdependence on fossil fuels.

The thousands of jobs needed to build the project will also be welcome, he said.

"Nova Scotians are willing and able to help with that work," Parker said. "Nova Scotia is thrilled to be part of this work."

Friday's signing did not involve a final contract, and Harper and the premiers of Newfoundland and Labrador and Nova Scotia did not attend.

Intergovernmental Affairs Minister Peter Penashue, Newfoundland and Labrador's federal cabinet representative, said the support will yield substantial results.

"These projects will create thousands of jobs, deliver countless economic benefits to our already flourishing province ... and open up significant new jobs and opportunities," he said.

Long in the works

The Newfoundland and Labrador government has been trying to develop the Lower Churchill project for decades.

The current proposal leaves undeveloped a site called Gull Island, which has several times the hydro potential of Muskrat Falls.

The provincial Liberal party has hammered away at Muskrat Falls as a fiasco in the making.

"Part of the problem here, is that people don't understand it and this is a big, big issue for the future of the province," Kevin Aylward, who took over the Liberal leadership reins last weekend, said Thursday.

NDP Leader Lorraine Michael said Friday's announcement is a hollow achievement, and that the forthcoming financial review should have been completed by now.

"What we hear now is that the work hasn't even begun," Michael said in a statement.