An economist says his pessimism about Newfoundland and Labrador’s future is dwindling following the announcement of a proposed new deal for power out of Churchill Falls.
Doug May, a longtime Memorial University economics professor with extensive industrial consulting experience, told CBC News he thought the financial situation in Newfoundland and Labrador was “unsustainable” — until Thursday’s announcement.
“In economist-speak, I said, ‘Wow, this is amazing. This is transformative,'” said May, who was an economic advisor for the Hibernia project in 1980.
May saw a gloomy picture of the province, he said, such as recent developments from the Come By Chance refinery, which indicate an incoming economic shutdown, as well as the nature of oil production as a non-renewable resource.
Then, the Churchill Falls announcement happened.
May likened the announcement to the day Newfoundland and Labrador joined Confederation, or when the iron mines opened in Labrador.
The new Churchill Falls memorandum of understanding offers the province $1 billion per year for the next 17 years. That’s up from the $20 million Newfoundland and Labrador was bringing in every year under the original 1969 deal.
With an effective price of 5.9 cents/kWh, power will be sold for 30 times higher than before, starting Jan. 1, 2025. That price will increase over time.
May says those figures indicate the province is now in a position to start paying down its net debt, which sits around $17 billion.
This year alone, the government of Newfoundland and Labrador borrowed $3 billion to stay afloat. Doug May, an economics research professor at Memorial University, says things could drastically improve if the details of a deal with Quebec over Churchill Falls come to fruition. The CBC’s Terry Roberts reports.
It’s also time to invest in the future, he said.
“It’s not just about the here and now and what you can do to keep going to your next paycheck,” said May. “It’s about what you can do in the future with this resource, which is renewable, and it’s clean energy. So all this is good.”
Labrador benefits
While in Happy Valley-Goose Bay on Friday, Premier Andrew Furey addressed the skepticism some residents across the province associate with the word “megaproject.”
“So I’ve had a couple of people ask me, ‘What’s the catch?'” said Furey. “The catch is the last 55 years. We already paid for the catch, now it is ours.”
He says the new flow of money will be used to help society in Labrador.
As well, he said, residential rates will stay the same for people in Labrador who are already on Churchill Falls power, thanks to an incoming rate mitigation plan.
“It will help meet the needs of the people of Labrador, which we know are different and often more complex, or differently complex, than the people of the island,” said Furey.
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