Ottawa has signed a tentative agreement to provide a loan guarantee for the proposed $6.2-billion Muskrat Falls hydroelectric project in Labrador.
A memorandum of understanding between the governments of Newfoundland and Labrador, Nova Scotia and the federal government was signed Friday in St. John's.
They are aiming to finalize the terms of the agreement by Nov. 30.
“We are committed and now we are working on the specific mechanics,” Federal Natural Resources Minister Joe Oliver said.
Mr. Oliver couldn't say how much in savings would result from the loan guarantee, adding that Ottawa must first hire financial advisers to help finalize the agreement.
“That's one of the pieces of information we will be gathering from the financial advisers and we'll be relying on data produced by Nalcor and Emera and information from credit agencies,” he said.
Prime Minister Stephen Harper promised to provide a loan guarantee or equivalent financial support for Muskrat Falls during the federal election. The Quebec government has voiced its opposition, saying any federal support for the project would amount to an unfair subsidy and encroaches upon provincial jurisdiction.
Under the conditions of a term sheet announced last year to develop the project, Nalcor Energy, Newfoundland and Labrador's Crown energy company, would spend $2.9 billion to build a power generating facility at Muskrat Falls capable of producing 824 megawatts of electricity.
A transmission link from Labrador to Newfoundland would cost $2.1 billion, $600 million of which would be provided by Nova Scotia-based private utility Emera. It would include a 30-km subsea connection across the Strait of Belle Isle.
Emera would also fund a 180-km subsea link between Cape Ray, N.L., to Lingan, N.S., at a cost of $1.2 billion.
Under the agreement, the project would provide Nova Scotia with 170 megawatts of energy annually — about eight to 10 per cent of the province's total power needs — for 35 years.
Proponents say they hope to have energy flowing in 2017-2018.
The project has been on the drawing board in one form or another for decades. In 1980, it passed an environmental assessment but was set aside due to concerns over market access and financing.
Concerns over the loss of habitat that would result from the development of the project have also stalled its progress in the past. But Nalcor has promised to develop a compensation plan to make up for that.
The desire to build more power plants on the Churchill River in central Labrador can be traced back to 1972, when the Churchill Falls hydroelectric dam was finished with Quebec's help.