Premier urges Ottawa to back hydro project

The development, which will see hydroelectric power from Labrador sent by undersea cables and power lines to Newfoundland and Nova Scotia, and possibly to New Brunswick and the United States, is such a crucial project for the poorest part of the country that the federal government must participate in some form, Mr. Dexter told The Globe and Mail's editorial board.

"If the federal government can't find a way to support and participate in this kind of a project, then I think our Confederation has a lot more work to do," Mr. Dexter said. "Because of its gravity in Atlantic Canada to provoke investment and to create a stable, secure, energy future for the whole region, it is a nation-building project... [so] the federal government should want to participate."

Nova Scotia and Newfoundland have asked Ottawa for loan guarantees to help reduce the financing costs for the $6.2-billion project, which will see Nova Scotia energy company Emera Inc. partner with Newfoundland's Nalcor Energy to build the 800-megawatt power plant at Muskrat Falls in Labrador and transmission lines.

Loan guarantees would not likely cost the federal government money directly, Mr. Dexter said, but would significantly reduce the borrowing costs for the project, thus easing the rise in power rates in Atlantic Canada that will be needed to finance it. He said Ottawa could also offer direct subsidies for the project.

Mr. Dexter said he has had discussions with Prime Minister Stephen Harper and Defence Minister Peter MacKay, who is senior minister for Atlantic Canada, and "I have great faith that the government recognizes the importance of this project." However, even if Ottawa opts out, the project will go ahead, he added.

He said he did not know if financing for the project would become an issue in a federal election, if one were called this year, but "the people of the region see it as a very important project, and I don't think they would understand a reason why it wouldn't be supported by the federal government."

Quebec has objected to the idea of Ottawa helping to finance the project, arguing that the federal government does not subsidize electricity production or transmission in other provinces.

Mr. Dexter noted, however that the federal government has helped finance some energy projects in Quebec, such as natural gas pipelines.

Over the long term, he said, improving the electrical infrastructure in Atlantic Canada will help stabilize power prices and ensure that the region is not "hostage" to the cost of fossil fuels. "Right now, the money that we spend to buy carbon-based fuels goes to the U.S. and South America. [With more local generation] that money will no longer go outside of the country."

The transmission infrastructure created to handle the Churchill power will also make it easier to connect other new "green" power projects in the region, such as wind farms and tidal power projects, Mr. Dexter said.

Over all, energy co-operation among the Atlantic provinces can be a "game changer" for the region, Mr. Dexter said. "It means that for the first time in history, Newfoundland won't be an energy island. It will be part of the continental grid [and] it means that Nova Scotia will be the centre of a significant energy hub."