Response to The Globe and Mail column titled "New Brunswick's oil and gas dream" - Jeffrey Simpson's comments on Churchill Falls contract are misinformed

Jeffrey Simpson’s comments on the Upper Churchill power contract involving Hydro-Québec, presented in a column titled "New Brunswick’s oil and gas dream” published in The Globe and Mail on February 22, are misinformed and reflect a very partial understanding of the matter.

Mr. Simpson suggests that Newfoundland has been “ripped off” for decades by Hydro-Québec through the Upper Churchill power contract. This allegation ignores important historical facts surrounding this contract.

First, the contract for Upper Churchill power between Hydro-Québec and Churchill Falls (Labrador) Company was concluded to the satisfaction of both parties. At the time of the execution of the contract in 1969, the main shareholder (56.9%) of CFLCo was Brinco (British Newfoundland Corporation). Hydro-Québec was the other main shareholder at 34.2%. Brinco itself was a privately-owned corporation whose majority shareholder was a Canadian holding company owned jointly by Rio Tinto-Zinc Corporation Limited and Bethlehem Steel Corporation. The terms of the contract reflect, among other things, the fact that the price was based on the development costs of the Upper Churchill project and the fact that Hydro-Québec assumed all of the risks – which were considerable for this large project – for the development of the Upper Churchill. This was the fundamental basis for the power contract between the parties.

Second, the Province of Newfoundland was fully aware of the terms of the Upper Churchill contract when it acquired Brinco's shares in CF(L)Co and became the majority shareholder of CF(L)Co in 1974.

Marc-Brian Chamberland
Director – Corporate Communication
Hydro-Québec