COVER

POWER TO BURN

A POLITICAL DEADLOCK MAY STALL THE JAMES BAY PROJECT

D’ARCY JENISH May 21 1990
COVER

POWER TO BURN

A POLITICAL DEADLOCK MAY STALL THE JAMES BAY PROJECT

D’ARCY JENISH May 21 1990

POWER TO BURN

COVER

A POLITICAL DEADLOCK MAY STALL THE JAMES BAY PROJECT

After working for the past four years on Hydro Quebec’s massive James Bay project, André Bernard says that he would be reluctant to work in Southern Canada again. Bernard, a concrete finisher from Quebec City, is one of 2,300 workers now constructing four new powerhouses, worth $6.3 billion, as part of the hydroelectric complex on the La Grande River, 1,000 km north of Montreal. He earns a minimum of $800 a week, almost twice what he could make in the south, and Hydro Quebec provides free housing and meals. When his current job is finished two years from now, Bernard says, he plans to move on to Hydro Quebec’s next James Bay project, the $6-billion Great Whale development. “I’m here till the end,” he said. “I’m 48 years old and I’ll work here until I’m 55.” But, before Great Whale begins, Hydro Quebec must subject the project to public environmental hearings. And after six months of intense negotiations, Quebec and Ottawa last week failed again to reach an agreement on the scope of the environmental assessment.

Objectives: For Quebec Premier Robert Bourassa, there is far more at stake than jobs. Hydroelectric development in the vast James Bay territory is the centrepiece of his Liberal government’s economic strategy. A huge portion of the 135,000-square-mile territory in northwestern Quebec has already been tamed by the La Grande complex, which is the world’s

largest hydroelectric development, with a capacity of 10,282 megawatts. Now, Bourassa’s government and provincially owned Hydro Quebec are determined to build the final two phases of James Bay. Behind that determination lie two key economic objectives: an eightfold increase in power exports, worth billions of dollars, to New Brunswick, Ontario and the United States by the year 2006; and the availability of huge quantities of electricity for a series of new aluminum smelters under construction along the St. Lawrence River. Said Hydro Quebec chairman and chief executive officer Richard Drouin: “There is no doubt that we are at a critical juncture. This is a time for choices.”

Apart from its economic importance to the province of Quebec, the existing James Bay hydro complex has become a technical showpiece that has attracted engineers, political leaders and electrical-utility executives from all over the world. What lures people from southern Quebec and around the world is a complex that is awesome in scale. In a land of sparse and spindly black spruce, which for centuries supported a few thousand Cree trappers and hunters, Hydro Quebec has built a hydroelectric complex that stretches 800 km

from east to west. The five _

reservoirs of the La Grande complex, which was begun in 1971 and is only now nearing completion, cover 4,534 square miles, equivalent to more than half the area of Lake Ontario.

When Bourassa unveiled plans to develop James Bay in May, 1971, during his first stint as premier of Quebec, he called it “the project of the century.” Now, Hydro Quebec is determined to proceed with the second major development in that ambitious project.

The utility plans to begin construction this fall of a 500km road to the Great Whale

River from Radisson, a town of 2,000 created to operate the complex. Hydro Quebec’s plans call for the construction of dams, dikes and powerhouses to begin by mid-1992 and be completed by January, 1998. To meet its deadlines, Hydro Quebec wants all hearings concluded and permits issued by early 1992.

But Hydro Quebec’s tight timetable has created a deadlocked political fight between Ottawa and Quebec. Because of court rulings during the past year that halted the construc-

tion of a dam in Saskatchewan

and scaled down work on an Alberta dam, Ottawa has no choice but to insist on extensive environmental hearings into the Great Whale complex. Because that project would involve flooding 382 square miles of black-spruce forest, diverting rivers and building miles of dams and dikes, some environmentalists say that it could seriously damage wildlife in the region (page 56). Normally, federal environmental hearings would not have any predetermined time limits. But such a timetable is unlikely to suit Hydro Quebec, said Carol Martin, Quebec regional director of the Federal Environmental Assessment Review Office. “From Quebec’s point of view,” he said, “it’s a question of having the reviews according to the timetable of Hydro Quebec’s engineers.”

Campaign: While Ottawa and Quebec City argue over that issue, opposition to further hydroelectric development in the James Bay region has also been growing in the northeastern United States, partly as the result of a publicity campaign organized by the Grand Council of the Crees of Quebec, who represent the 9,700 Indians living in the area (page 54). And political analysts say that the dispute over the environmental hearings has placed federal Environment Minister Lucien Bouchard in an increasingly uncomfortable position.

Bouchard, a strong Quebec nationalist and a personal friend of Prime Minister Brian Mulroney’s, has acquired a reputation for defending Quebec’s interests in the federal cabinet. But now he is being called upon to enforce the federal position in a showdown with his home province. At the same time, David Cliche, one of the minister’s Quebec advisers, said that Bouchard is under political pressure from Western Canada to stand up to Quebec because of the Federal Court of Canada decisions against completion of the the Rafferty-Alameda dam in Saskatche-

wan and the Oldman River dam in Alberta.

Officials in Bouchard’s office said last week that the minister had no comment to make on the deadlocked negotiations. But Cliche said: “Bouchard must be seen to be as strict with Quebec as he is with the western provinces. You can be sure the western premiers are watching him closely.”

Martin said that there have been about 10 meetings since Ottawa-Quebec negotiations began in earnest in December, 1989. According to a senior federal environment official, who requested anonymity, Quebec’s negotiating strategy has been based on the assumption that Bouchard would back down rather than fight at a time when federal-provincial relations are under a serious strain because of disagreement over the Meech Lake constitutional accord. The same official added that the Quebec negotiators appear to be convinced that, even if Bouchard remains firm, they could persuade Mulroney to meet their demands for abbreviated environmental hearings.

Review: Federal officials claim that Quebec’s position has remained almost unchanged since the negotiations began. Martin said that the province wants the environmental assessments carried out in two stages. The first would deal with access roads, airports and marine terminals, and Quebec contends that

Ottawa should not be involved in this phase. The second would examine the impact of the dams, dikes, reservoirs and powerhouses on the environment. Quebec has stipulated that this review must be complete within four months, Martin said. He added, “Our position is that the review panels themselves have to be free to decide the proper time frame.”

Federal officials say that Ottawa is merely insisting on a proper assessment of the Great Whale project. Later, a separate round of environmental hearings would be required for the third phase in the project, the NottawayBroadback-Rupert (NBR) complex, named after the three river systems that would be developed, which is scheduled to be constructed between 1996 and 2006.

At the same time, native groups and environmentalists say that they are determined to halt the Great Whale and NBR projects altogether. The Grand Council of the Crees has launched legal actions in the Federal Court of Canada and the Quebec Superior Court to block Hydro Quebec’s plans. Cree spokesmen say that they are also prepared for a direct confrontation with the giant utility if necessary. Said Brian Craik, an Ottawa-based official with the Grand Council: “We may be camped out in tepees in front of bulldozers this fall.”

There are signs, too, that ordinary Quebecers are beginning to question the necessity of more hydroelectric megaprojects in their province. A public opinion poll conducted in April and published in the Montreal biweekly newspaper This Week in Business showed that 51 per cent of the respondents said Hydro Quebec should not pursue job creation and energy security at the expense of the environment and the native population.

SOME EXPERTS ARE QUESTIONING THE ECONOMIC WISDOM OF THE PROJECT

However, many Quebecers are clearly captivated by the vast scale of the project. Gilles Saulnier, a Hydro Quebec public relations officer based in Radisson, said that about 10,000 people visit the La Grande complex every year. The vast majority are Quebec residents who arrive on airplanes and tour buses, visit La Grande and spend one or two nights in Radisson’s only hotel. The project also attracts engineers from all over the world and VIPs who arrive as guests of the Quebec government.

Headwaters: Construction of the complex began more than 20 years after the idea was first proposed. A team of engineers from a privately owned Quebec utility called Shawinigan Water and Power Co. examined the hydroelectric potential of James Bay from 1950 to 1959. Hydro Quebec spent six years, between 1964 and 1970, studying the territory before deciding to proceed in the fall of 1970. During the construction of La Grande, the headwaters of the Caniapiscau River, which once flowed northeast into Ungava Bay, were blocked and diverted so that they now flow west into James Bay.

Altogether, Hydro Quebec has so far taken control of three watersheds in the James Bay region by building nine dams and 206 dikes that extend for a total of 81 miles. Those earth-

retaining structures, as they are called, were constructed from 207 million cubic yards of sand, gravel and rock—enough to form the road bed for 280 km of four-lane highway. La Grande 2 dam, one of the principal structures in the entire project, is 1.7 miles long, almost half a mile thick at the base and as high as a 53storey building.

Hydro Quebec initially built three powerhouses, called La Grande 2, 3 and 4, which are capable of supplying electricity to a city of four

million people. Now, it is building four more powerhouses that will increase the La Grande’s electrical generating capacity by 45 per cent to 14,791 megawatts. The centrepieces of the entire project are the powerhouses called LG2 and LG2A, which were blasted out of granite 45 storeys underground*. LG2, the fifth-largest powerhouse in the world, is one-third of a mile long and large enough to accommodate two football fields. Despite the vast size of the La Grande complex, planners af Hydro Quebec now say that they hope to complete construction of the two new projects, the Great Whale and NBR complexes, by eariÿ in the next century. They would increase Hydro Quebec’s James Bay capacity by 77 per cent, raising total electrical output to 26,000 megawatts.

Wisdom: In the past, critics of the James Bay projects have focused primarily on the potential environmental consequences. Now, some experts are beginning to question the economic wisdom of the projects as well. Ian Goodman, a Boston-based energy consultant who carried out an economic analysis of Great Whale for the Cree, said that Hydro Quebec could end up with excess capacity and underused powerhouses early in the next century.

In that case, Quebec consumers would face steep rate increases to enable the utility to cover the huge annual interest charges on its bonds and debentures. Goodman noted that Quebec’s population is growing slowly and that U.S. power utilities are attempting to reduce consumption through conservation.

Other critics say that about $3.5 billion in debt charges related to the La Grande complex have already strained Hydro Quebec’s finances. Last year, the utility spent $2.5 billion, or 45 per cent of its $5.5-bilhon revenues, in interest payments. Hélène Connor-Lajambe, director general of the Centre for Energy Policy Analysis near Montreal, said that Hydro Quebec has cut back spending on routine maintenance and equipment replacement, which has resulted in a record number of blackouts, in order to meet its debt charges.

Investors: For their part, Hydro Quebec executives point out that they have financed James Bay and other major projects, such as transmission lines to carry electricity south, with government-backed bonds and debentures.

These securities are sold co investors for terms ranging from five to 10 years and at fixed rates of interest. André Marcii, the utility’s assistant treasurer and director of financing, said that Hydro Quebec has already raised $1.9 billion this year through the sale of bonds and debentures, and plans to raise another $1.1 billion this fall. Said Marcil:

“We’re quite comfortable. If Hydro Quebec was in the middle of construction and a recession hit, we would be in a position to adjust construction rapidly.”

In its development plan for the 1990s, which is currently under review by a committee of the Quebec national assembly, Hydro Quebec defends its export policy of the previous decade. The utility also says that exports will play a critical role in its planning for the 1990s. Hydro Quebec said that it earned $5 billion by selling power to the United States during the 1980s,

which is one of the main reasons that residential hydro rates in Quebec are among the lowest in North America.

Now, with the utility’s plan to increase exports eightfold by the year 2006, exports would rise to 9.5 per cent of total sales from 1.5 per cent in 1991. In order to achieve that objective, Hydro Quebec is seeking provincial approval to build the Great Whale and NBR projects before they are needed to meet Quebec’s own electrical needs. In return, officials

of Hydro Quebec say that the projects will bring long-term benefits to Quebecers. Declared Horizon 1999, the utility’s plan for the 1990s: “When the [export] contracts expire, Quebec will have facilities that would have been far costlier to build at a later date.” Smelters: Electricity from James Bay is also seen by many as an important lever for stimulating economic development in Quebec. During the past two years, Hydro Quebec has used the prospect of cheap electricity to develop an aluminum and magnesium industry along the St. Lawrence. The utility has agreed to sell electricity to the smelters based on world prices for their products, rather than at fixed rates. Two new aluminum smelters, worth $2.2 billion, are under construction, and a third is being expanded at a cost of $500 million. As well, Norwegian-based Norsk Hydro in April completed construction of a $550-million magnesium plant at Becancourt, 100 km m east of Montreal. In all, 15,000 8 direct and indirect permanent jobs u have been created. Said Drouin: “Basically, what we have done is share the risk with these companies.”

Besides the economic benefits of hydro development, Hydro Quebec executives point out that it is a cleaner way of producing electricity than burning coal, natural gas or oil, and safer than using nuclear energy. They claim that Quebec’s demand for electricity will grow by 40 per cent within 15 years. In order to meet that demand, electrical generating stations with a total capacity of 8,000 megawatts must be built. If Quebec does not use hydroelectricity, it will be forced to use coal, natural gas, oil or nuclear. Said Drouin: “In our view, none of the alternatives are feasible economically, technically or environmentally. Hydroelectricity is our first choice.”

Fight: That determination to continue developing Quebec’s hydroelectric potential means that Bourassa’s government and its giant utility will undoubtedly continue to fight for the Great Whale project, the next step in the massive James Bay development. Hydro Quebec has already built the largest hydroelectric project in the world in a once-remote wilderness where winter temperatures frequently plunge to -40°C. As Montreal investment counsel Stephen Jarislowsky says, the wild waters that spill into James Bay are “a unique and valuable asset, something that not many other parts of the world possess.” Now, in the struggle that looms over James Bay, the Cree and their allies in the environmental movement are determined to protect those waters, while Hydro Quebec is determined to harness them.

D’ARCY JENISH

ROSS LAVER

DOUG NIXON

BARRY CAME