In the far northern reaches of Atlantic Canada, energy companies seek to harness untapped river sites with a hydroelectric project that could replace fossil fuel plants and export power into New England.

Utility company Nalcor Energy aims to build two hydroelectric sites along the Lower Churchill River in Labrador, downstream from an existing 5,428-megawatt station -- one of the largest in the world.

The proposed Muskrat Falls and Gull Island projects would have a combined capacity of more than 3,000 MW, produce 16.7 terawatt-hours of electricity per year and offset millions of tonnes of greenhouse gas emissions, says the company.

"It translates into displacing 16 megatonnes of carbon dioxide annually from thermal, coal and fossil fuel generation," said Nalcor spokeswoman Karen O'Neill. "That's equivalent to offsetting the greenhouse gas emissions from 3.2 million automobiles annually."

Nalcor is currently waiting for government approval before it can begin phase one of the Lower Churchill Project -- the 824-MW facility at Muskrat Falls, with high-voltage direct-current transmission links to Newfoundland and Nova Scotia. The much larger and potentially more environmentally damaging Gull Island project is currently on hold. Late last month, the Canadian federal government announced it would back a $6.2 billion loan to develop the Muskrat project.

"The loan guarantee isn't requiring Canada to directly fund the project; we're using their borrowing capability to improve the economics of the project," said Gilbert Bennett, vice president of the Lower Churchill Project. "In doing [this], Canada is supporting a major infrastructure project that will reduce greenhouse gas emissions and will ultimately reduce electricity costs in Atlantic Canada."

Muskrat Falls alone would displace 2 megatonnes of greenhouse gases per year from the oil-powered Holyrood thermal plant in Newfoundland, said Bennett. It would also displace 1 megatonne of emissions from a coal-fired plant in Nova Scotia.

Another benefit is that the project would create as many as 2,700 jobs during the construction phase. That amounts to 8,600 person-years of direct employment in Newfoundland and Labrador. The socioeconomic and clean energy benefits make the Lower Churchill Project very attractive, particularly to energy-hungry American states. But the Canadian Parliament must still review an independent environmental assessment and pass Nalcor's proposal before construction can begin.

Supplying U.S. peak summer demands
Last November, Naclor joined forces with Emera Inc. to get the Muskrat Falls project under way. Nalcor would have 100 percent ownership of the generating facility and would control a majority of the Island Transmission Link from Labrador to the island of Newfoundland. Emera would be primarily responsible for the Maritime Transmission Link to Nova Scotia, which will be the first-ever interconnected maritime system.

According to their agreement, Nalcor would take 40 percent of the hydroelectric output and Emera would take 20 percent to power their respective provinces. That leaves 40 percent of Muskrat Falls' energy capacity for export, and almost all of the 2,264 MW from the Gull Island site, should it be developed.

Govs. Peter Shumlin (D) of Vermont and Lincoln Chafee (I) of Rhode Island visited the Lower Churchill Project site in August to start forging business relationships. The trip was proposed in July during the annual Conference of New England Governors and Eastern Canadian Premiers in Halifax, Nova Scotia.

"From our perspective, we think there are a number of good reasons why Canadian hydro is a good answer for U.S. needs," said Bennett. "We're competitively priced, we have a renewable product and we integrate well with other renewables."

He added that the U.S. and Canadian systems are complementary. The United States' peak electricity demands are in summer, when customers need electricity to power their air conditioners, while Canada's peak demands are in winter -- Canada uses electricity for heating, whereas the United States has access to natural gas.

Rhode Island is interested in the Canadian hydro project because of the state's chronically high energy costs, said Chafee's deputy communication officer, Christian Vareika. Both businesses and residents have been pushing for cheaper energy, and the Lower Churchill Project could offer a less expensive and more sustainable solution.

"The governor is interested in finding more affordable renewable energy," said Vareika. "This project is one of the largest in North America, so it's capable of producing a lot of power, but also in a clean fashion."

Clean energy, but some cost to the environment?
While hydroelectricity is one of the most sustainable sources of energy, the process of damming a river and flooding other lands can be highly destructive. When the large-scale Lower Churchill Project was first proposed, a number of factors triggered mandatory environmental review. The Joint Review Panel formed in 2009 released its findings just last month.

According to the panel's report, "the Project would have several significant adverse environmental effects on the aquatic and terrestrial environments." Notably, the panel found that Nalcor did not complete a sufficient assessment of the amount of mercury the project would accumulate. It states that some members of the public were particularly concerned about the contamination of fish and seal, which could lead to food consumption advisories. The panel also found that changes in sediment, nutrient supply and water temperatures could have negative effects downstream in the area of Goose Bay.

Federal and provincial environment ministers are now reviewing the report before a bill to approve or reject the project passes through the chambers of Parliament. The government will consider both environmental and socioeconomic factors in making its decision. Bennett said he expects a verdict by the end of the year.

In the meantime, a major boost for the project came from the Innu Nation of Labrador, an aboriginal group whose consent was required under the constitution. After months of negotiations with the province and Nalcor, in the early hours of July 1, the Innu board members voted overwhelmingly in favor of a three-pronged agreement that supports the Muskrat project.

"Certainly aboriginal support has been a major issue for hydro development in Canada," said Bennett. "So we're delighted the agreement we have with the Innu Nation was ultimately ratified by the people."

Looking 7 generations ahead
The New Dawn agreement ensures that the Innu nation gets "first strike" capability to bid on construction contracts, said Grand Chief Joseph Riche. It also gives the community 5 percent of the Muskrat operation from the day it begins, which would increase once the site is operating at full capacity. Income for the Innu will never drop below $5 million a year, said Riche.

Another part of the deal compensates the Innu for the flooding of their burial sites and hunting grounds during the construction of the original Churchill Falls Hydro Dam. The third element secures lands and resources for the Innu. While the details of some land claims are still being negotiated, the deal has been approved and will be signed at an official ceremony in October.

Despite the many upsides, the Innu board members' decision to support the project wasn't easy, said Riche. The Innu, who have lived along the Churchill River for generations, had difficulty agreeing to block the river, knowing that animals and their natural habitat would be harmed.

"They knew by damming the river they would hurt the environment, but the decision they made when they said yes was because of their grandchildren, because of job security and other programs," he said. "You're being asked to let go of something in exchange for something your grandchildren will have."

Support for the Muskrat Falls project was based on the Innu Nation's seven-generation plan, which ensures there will be enough resources for the community to survive, said Riche. Leaders in New England and the Canadian Maritimes are likely viewing the Lower Churchill project the same way.

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC., 202-628-6500