Canada, Quebec and Newfoundland and Labrador have signed a $10 billion (US$7.2 billion) non-binding agreement to expand the Churchill Falls generating station, a project Ottawa is calling the largest clean energy investment in North American history.

Prime Minister Mark Carney, Newfoundland and Labrador Premier Tony Wakeham and Quebec Premier Christine Fréchette signed the deal Monday at a ceremony in St. John's.

"When we master energy, we master our destiny. Through cooperative federalism, we are unlocking our immense potential," Carney said.

The expansion would nearly triple the capacity of Churchill Falls, located about 245 km from Labrador City and the country's second-largest hydroelectric station. The investment covers upgrades to the existing station as well as construction of the Gull Island hydroelectricity project between Churchill and Muskrat Falls, a development on the lower Churchill River that has been studied for decades. More than 600 km of transmission lines will be built to connect to the two stations and deliver electricity to Quebec. The most recent Churchill River development, Muskrat Falls, was completed years behind schedule and billions of dollars over budget, prompting a public inquiry into its planning and oversight.

Replacing a contentious 1969 contract

The new deal is set to replace a contentious 1969 power supply contract between Quebec and Newfoundland and Labrador, along with a December 2024 Memorandum of Understanding between Newfoundland and Labrador Hydro and Hydro-Quebec. The 1969 agreement, which for decades allowed Quebec's state-owned utility to buy electricity from Churchill Falls at 0.2 cents per kilowatt-hour and resell it at market rates, has shaped the relationship between the two provinces. The contract, which runs until 2041, survived repeated legal challenges, including a 2010 Supreme Court of Canada ruling that it had to be renewed on the original terms.

Hydro-Quebec will now have access to a total potential of more than 10,000 megawatts of electricity from Labrador — double the current production. Of that amount, 6,915 MW are firm, while 3,850 MW are associated with the potential of projects currently under study, Hydro-Quebec said in a separate statement. Quebec says it will pay a rate of 6¢ per kilowatt-hour, about one-third of what other sources of energy would have cost. Hydro-Quebec has pointed to growing electricity demand in Quebec — driven by industrial electrification and new manufacturing projects — as it seeks additional supply, and already exports power to the northeastern United States.

Boost for Labrador mining

In a news release, Ottawa said the transmission expansion will support mining operations in the Labrador Trough region. The Labrador Trough, which extends from western Labrador into Quebec, is one of Canada's leading iron-ore producing regions.

"Newfoundlanders and Labradorians will finally be the primary beneficiary of our own resources, with complete control over whether we use our power to develop our economy or sell to outside markets," Wakeham said.

Through Natural Resources Canada's (NRCan) First and Last Mile Fund (FLMF), the federal government is providing $2.3 million to complete a study for the transmission lines and stations needed to bring more power to the Labrador west area. The expansion would benefit the Kami iron mine and the Lac Knife graphite mine, as well as other projects in the region. Graphite is on Canada's critical minerals list, which Ottawa has identified as essential to energy-transition supply chains. Because Monday's agreement is non-binding, final contracts and regulatory approvals are still required before the expansion proceeds.