2023-06-21 09:05:24
The entry of the iron ore giant strengthens the negotiating position of Newfoundland and Labrador, which recently entered into formal discussions with Quebec on the future of the controversial Churchill Falls contract, as well as the possible construction of the Gull Island project.
Hydro-Quebec, whose energy surpluses might have melted by 2027, has long been the only customer considered for this latest dam project, downstream of the Churchill River.
IOC is the number one industrial polluter in Newfoundland and Labrador, producing 1 million tonnes of greenhouse gases per year. It wants to electrify its facilities using wind turbines, but above all by increasing its purchases of hydroelectricity. Up to 800 megawatts of clean electricity will be needed, according to current forecasts.
“There is hydro power available in Labrador, so that’s probably the easiest solution for us. »
— A quote from Chantal Lavoie, Chief Operating Officer, IOC
Chantal Lavoie says talks with Newfoundland and Labrador Hydro on a new transmission line began three years ago.
He explains that IOC is following very closely the progress of the discussions on Gull Island, a 2250 megawatt project mentioned several times by the Premier of Quebec, François Legault, as a possible solution to meet the growing electricity demand of its province.
The potential competition between the mining company and Hydro-Quebec is a slightly delicate question, admitted Chantal Lavoie in an interview with Radio-Canada last week. I think people realize the needs of each stakeholder and it’s up to the Government of Newfoundland to make the decision that’s best for the province.
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NL has never been in a better bargaining position
Newfoundland and Labrador Premier Andrew Furey is pleased with the situation. His province has never been in a better negotiating position, he said.
Previously, we might not use the energy ourselves. This was one of the problems with the Upper Churchill project. We [Terre-Neuve-et-Labrador] Had all that energy, but we didn’t need it […] These days, I’ll tell you we’ve got clients in this room, he told IOC CEO Mike McCann as the new Rio office opened. Tinto, IOC’s parent company, in Saint-Jean on May 30.
It is entirely to the advantage of Newfoundland to have a new potential buyer, argues the full professor at HEC Montreal, Pierre-Olivier Pineau.
Pierre-Olivier Pineau is an expert in energy policies and a professor at HEC Montréal.
Photo : Radio-Canada
Suddenly, Hydro-Quebec and Quebec are no longer the only buyers for this electricity, so it increases the value of electricity both from Churchill Falls, therefore from Haut-Churchill, and from the Gull Island project.
Éloïse Edom, research professional at the Institut de l’énergie Trottier at Polytechnique Montréal, reminds us that Hydro-Québec remains a much bigger client than IOC. The mining company aims to purchase a few hundred megawatts of electricity, while Hydro-Québec already buys almost all of the 5,428 megawatts produced at the Churchill Falls power station.
Éloïse Edom is a research associate at the Trottier Energy Institute of Polytechnique Montréal.
Photo : Radio-Canada / Jessica Rubinger
The order of magnitude is different, she summarizes, while adding however that IOC is a local client and that its presence at the negotiating table is a great lever to promote the construction of Gull Island.
A new dynamic at the bargaining table?
According to Normand Mousseau, Scientific Director of the Trottier Energy Institute, if the modernization of IOC’s facilities strengthens Newfoundland and Labrador’s negotiating position, the situation might also allow for a more mature relationship that will not It’s not such a tense relationship between Saint-Jean and Quebec.
Last February, the Premier of Newfoundland and Labrador, Andrew Furey, received his Quebec counterpart, François Legault, to discuss the renewal of the Churchill Falls hydroelectric contract.
Photo: The Canadian Press/Paul Daly
Andrew Furey and Francois Legault are seeking to bury the hatchet following decades of friction over the existing Churchill Falls power contract, which expires in 2041. Spanning 65 years, with no possibility of negotiation, the contract allows Quebec to make billions of dollars by reselling the electricity purchased from its neighboring province at a derisory price: 0.2 cents per kilowatt hour.
If we have an economic partner like IOC, well, on both sides, we have to say, “OK, our negotiation, it must be real so that we can deliver the goods. We can’t just fight,” says Normand Mousseau .
Economic engine
IOC, which employs 2,400 people, says it brought in $1.3 billion to the local economy and paid $530 million in taxes in 2022. It has operated an iron ore mine, concentrator and pellet plant since 1962 near Labrador City, as well as a 418 km railway line to transport the pellets to Sept-Îles, on the North Shore of Quebec.
The company promises to reduce its emissions by 50% by 2030 and to be carbon neutral by 2050. It is seeking to electrify its facilities, especially its pellet plant, where it burns coke, a form of metallurgical coal capable of reach very high temperatures.
The Rio-Tinto-IOC mine in Labrador-City.
Photo : Rio-Tinto-IOC
Almost all pellets are sent to steel mills. Steel production accounts for 2% of Canada’s annual emissions and 7% of global emissions, according to a report (New window) of the Public Policy Forum published in April. This same document anticipates that the demand for steel will increase by 10 to 40% by 2050 to allow the construction of solar panels, wind turbines and electricity pylons.
According to IOC, demand for iron ore from the Labrador Trough – which is relatively purer, takes less energy to process and might soon be fully electrified – is expected to surge in the coming years.
Other possible industrial customers?
Pierre-Olivier Pineau recalls that Rio Tinto is very present in Quebec and will want to maintain good relations with the CAQ government. According to him, Hydro-Quebec remains very well placed to negotiate and, in fact, it is certain that part of this electricity will be in Quebec.
However, he believes that IOC may not be the only local industrial buyer of Churchill River hydroelectricity.
ArcelorMittal’s Mont-Wright mine in Fermont might be interested in hydroelectricity from the potential Gull Island dam project on the Churchill River, according to Pierre-Olivier Pineau.
Photo : MRC de Caniapiscau
He points out that ArcelorMittal’s Mont-Wright mine is located a few kilometers from the Labrador border, near Fermont. ArcelorMittal did not respond to an interview request.
According to the professor, other companies aiming to produce hydrogen might also be interested in the clean electricity power of Labrador.
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