A research paper by Memorial University’s Dr. James P. Feehan and Dr. Melvin Baker recently published in the Dalhousie Law Journal examines the renewal clause for the Churchill Falls contract. It suggests that questions regarding business ethics and law could be raised.
Entitled The Origins of a Coming Crisis: Renewal of the Churchill FallsContract, the paper is the first systematic investigation of this clause in the 39-year history of the infamous agreement. The research for the paper has been ongoing for some time and an earlier draft had been presented by Dr. Feehan at a political economy seminar at the University of Western Ontario. The current version represents the culmination of the research as a contribution to the peer-reviewed literature.
The current contract allows for automatic renewal at the 2016 expiry date for a future 25-year period. The authors contend that the pre-set price during this renewal period is extraordinarily low, to the point where it is “barely distinguishable from being free” and that the gap between received revenue and the wholesale value of electricity could amount to “billions of dollars per year” for each of the 25 years of the renewal period.
Dr. Feehan, the paper’s primary author and a professor of economics, says the main contribution of the paper is to explain the dramatic change in the renewal clause from its initial form, which provided for negotiation and mutual agreement on the terms of renewal, to one that requires that practically all the power be sold to Hydro-Quebec at a price that would have been considered extraordinary low even in 1968.
Professor Feehan goes on to observe that it is remarkable how little academic research has been done on the Churchill Falls development, considering its significance in Newfoundland and Labrador’s political and economic landscape. He suggests that a side-benefit of the current paper is to knock away some of the myths surrounding that controversial deal.
The authors drew on primary sources for their 50-page paper, including correspondence between CFLCo and Hydro-Quebec, and upon previously unknown documents, some obtained through freedom-of-information requests. The process led to the original contract has been put into the historical context of the late 1960s – this context is crucial to understanding Churchill Falls, says report co-author, archivist and university historian Dr. Melvin Baker.
Ultimately, Drs. Feehan and Baker conclude that immense consequences are inevitable as the renewal date approaches in 2016. They predict that the Churchill Falls Contract will once again be a matter of serious dispute that may involve both political and legal dimensions.
The paper appears in the Dalhousie Law Journal, volume 20, no.1.