A new Churchill Falls framework announced last week promises to ease decades of grievance between Quebec and Newfoundland and Labrador.
“We are finally turning the page on one of the darkest chapters in our past,” Newfoundland and Labrador Premier Tony Wakeham said at an Aug. 17 press conference in St. John’s.
Wakeham was accompanied by Quebec Premier Christine Fréchette and Prime Minister Mark Carney, who said Ottawa would put $10 billion towards the $70-billion project.
The project includes plans to upgrade the existing Churchill Falls hydro dam, develop a new onshore wind energy project and construct a hydro project on Gull Island.
Experts explain how Churchill Falls’ long and fraught history is key to understanding what makes this proposed deal so significant, and why, as Wakeham puts it, the new deal could finally be a “win-win-win” for everyone.
‘Ace in their sleeve’
The original 1969 Churchill Falls agreement came to be regarded as one of the most lopsided energy deals in Canadian history.
But it did not start out that way.
After Newfoundland and Labrador joined Confederation in 1949, then-premier Joey Smallwood was keen to diversify the province’s economy through large-scale projects, says Sean Cadigan, professor of history at Memorial University in St. John’s.
“[Smallwood] turned increasingly to megaprojects as the kind of economic salvation of Newfoundland,” Cadigan said, noting an earlier strategy of developing a manufacturing industry had not panned out.
“And one of [these megaprojects] was Churchill Falls.”
Signed in 1969 by Hydro-Québec and Churchill Falls (Labrador) Corporation (CFLco), the agreement allowed Hydro-Québec’s to buy 80 per cent of Churchill Falls’ electricity at pre-determined fixed rates until 2041.
CFLco initially thought the deal was tilted in the province’s favour, says Jean-Benoît Nadeau, co-author of Charging Ahead: Hydro-Québec and the Future of Electricity.
“They were convinced that they had suckered Hydro-Québec,” Nadeau said.
“Hydro-Québec had agreed to a lot of things that nobody had agreed [to] before,” he added. This included funding the entire cost of the project and the transmission lines from remote Northern Labrador down through Quebec and into New England.
“Transporting electricity is the main problem,” said Nadeau. “You cannot put that in a boat. You cannot put that in a container.”
Nadeau credits Hydro-Québec with having both the ambition and technical acumen to pull off this grand feat of engineering.
“When it was time to negotiate with Newfoundland, which actually had tried many times to start Churchill Falls, [Quebec] had an ace in their sleeve that nobody had,” he said.
But as energy prices rose, Hydro-Québec was ultimately able to export the power it received from Churchill Falls at significantly higher rates than the fixed rates it was paying.
For example, Hydro-Québec today pays just 0.2 cents per kilowatt hour for power from Churchill Falls. In the first quarter of 2026, it exported its electricity at a rate of 13 cents per kilowatt hour.
This disparity led to significant resentment towards the deal in Newfoundland — and two court challenges. But in both 1984 and 2018, Newfoundland and Labrador lost its cases at the Supreme Court of Canada.
“The Supreme Court said, ‘You cannot pretend that Hydro-Québec screwed you when you actually were convinced you had screwed them,’” Nadeau said.
“Newfoundland never lost money because they never put a cent into this project.”
But the decision did little to quell resentment over the agreement.
“I can’t ever remember a time when there wasn’t tremendous anger in the province about it,” said Cadigan, of Memorial University.
‘Vitally important’
Only now, with a new deal on the horizon, does the future look brighter.
The non-binding framework announced last week would replace a 2024 Memorandum of Understanding (MOU) between the provinces as well as the original Churchill Falls agreement.
A full contract is expected to be signed by March 31, 2027.
“The contract is nonexistent right now,” said Nadeau.
Wakeham says the proposed agreement would secure an even better deal than the MOU, with an expected $49-billion in profit for the province — up from $36 billion under the MOU.
It would also give Newfoundland the ability to sell up to 985 megawatts to Hydro-Québec at prices linked to market prices in neighbouring jurisdictions — a major change from the pre-determined fixed price under the 1969 deal.
“Newfoundlanders and Labradorians will finally be the primary beneficiary of our own resources, with complete control over whether we use our power to develop our economy or sell to outside markets,” Wakeham said during the Aug. 17 press conference.
Cadigan says Wakeham is hoping the eventual windfall from this new deal will help stabilize the province’s financial position, which has been hurt by soft oil prices and massive cost overruns on the Muskrat Falls hydro project.
“In that context … the 2026 deal becomes vitally important because … we have a massive and unsustainable public debt problem in this province,” he said.
Premier Fréchette also touted the benefits for Quebec.
“The [province’s] expertise in the field of hydroelectricity … has always been a source of pride for Quebecers,” she said at the press conference, noting her father’s own long career at Hydro-Québec.
“With today’s deal, I think we can be even more proud.”
Fréchette says the new wind and hydro projects included in the deal will increase Hydro-Québec’s production capacity by more than 25 per cent.
The poll-leading Parti Québecois has been critical of the deal, though party leader Paul St-Pierre Plamondon has rejected Fréchette’s claims that he would “rip up” the deal.
François Bouffard, an associate professor of electrical and computer engineering at McGill University, believes St-Pierre Plamondon will have no choice but to finalize the agreement if he gets into power.
“There might be some tweaks at the margins. But … Hydro-Québec needs energy and power in the next couple of years — [the supply] needs to be firm.”
‘Win-win-win’
Another factor weighing in the deal’s favour is that the federal government has stepped in to push it through. Ottawa has pledged up to $10 billion in federal financing and referred the project to its Major Projects Office.
Amid ongoing spats over pipelines between Alberta and B.C., finding interprovincial unity on a major project was pivotal for Carney, says Bouffard.
“For Mark Carney, this is a huge win because he can demonstrate that, politically, he can have different provinces collaborate on large energy projects,” he said.
Having a clean energy project is also useful, he says, noting the controversy over the numerous oil and natural gas projects being pursued out West.
“Almost all the other major projects are very fossil fuel based … you’ve got Alberta pushing in one direction and B.C. pushing in the opposite direction,” he said.
“Whereas in this case, we have two Eastern provinces who clearly see a net mutual benefit of collaborating. And by the same token, [Ottawa is] repairing the strained relationship between Quebec and Newfoundland and Labrador.”
Cadigan believes that, in the end, a surge in national unity has helped settle ancient scores.
“If we have anybody to thank for this particular deal at this moment, it’s probably Donald Trump,” he said.
“Most people want to support developments that appear to strengthen us relative to the United States. So it’s extremely difficult for anybody to really criticize what’s happening here, especially in terms of the federal government’s involvement.”
Sounds like Quebec has a lot of $$$ coming in. Why then do they NEVER, EVER pay into transfer payments. They ALWAYS draw from the pit.