Introduction – Déjà Vu Megaprojects
Newfoundland and Labrador has lived the same story so many times it feels almost scripted. A grand announcement promises salvation through the next “game-changing” project. Jobs will be created, debt will be tamed, prosperity will finally arrive. Then, as costs climb and timelines slip, the dream sours. The Muskrat Falls dam was yesterday’s solution; wind and hydrogen are today’s; and now, with the 2024 Churchill Falls Memorandum of Understanding (MOU) signed with Quebec, tomorrow is already being sold as the answer.
These are not isolated mistakes. They are the product of structural forces that push Newfoundland back, again and again, onto the same track. Understanding why requires looking beyond personalities or single projects and instead tracing the province’s path dependency and its chronic soft budget constraints.
Path Dependency: History as a Trap
Political scientist van Assche describes “path dependency” as the way institutions, ideas, and material systems lock societies into repeating patterns. He identifies four types:
- Cognitive dependencies – leaders can only imagine solutions that look like the last one.
- Institutional dependencies – bureaucracies are structured to repeat established processes.
- Goal dependencies – the same short-term priorities always outrank long-term thinking.
- Material dependencies – physical infrastructure and debt loads force repetition¹.
Newfoundland embodies all four. Cognitive habits frame prosperity as something that only a megaproject can deliver. Institutions at the provincial level are wired to approve and administer projects rather than cultivate resilience. Politically, the goal is always “jobs now, votes now, costs later.” Materially, the province is chained to the debts and infrastructure of past projects, which shape the next one.
The history is stark. The 1969 Churchill Falls contract, locked in for 65 years, entrenched dependence on Hydro-Québec. Muskrat Falls doubled down, absorbing billions and destabilizing the province’s finances. And now the new Churchill Falls MOU is framed as “historic progress,” but structurally it repeats the same reflex.
Muskrat Falls: Promise vs. Reality
As early as 2005, U.S. diplomatic cables from Halifax recorded Nalcor and provincial officials projecting that Muskrat Falls would be operational by 2015⁷. Construction was expected by 2010, with first power flowing five years later. This confident promise was relayed internationally years before work even began, reinforcing the sense that Newfoundland’s future was already predetermined.
The reality was very different. Muskrat Falls was only sanctioned in 2013. First power came not in 2015 but in 2021 — nearly a decade late and at twice the projected cost. Reliability issues continue into 2025. The contrast between promise and reality could not be starker.
And yes, Brad Cabana was right.
Brad Cabana and the Erasure of Dissent
Independent critics tried to stop Muskrat before it broke ground. Brad Cabana, a political blogger at Rock Solid Politics, became one of the earliest and fiercest opponents. He argued the numbers didn’t add up, warned of overruns, and called out governance failures long before they became undeniable¹⁴.
For that, he was systematically erased.
- 2011 – Legal intimidation. Former premier Danny Williams sued Cabana for defamation after he alleged corruption around Muskrat. Security concerns were raised at the courthouse, with Williams’ team painting Cabana as unstable¹³.
- 2012 – Court challenge. Cabana launched a constitutional case to stop Muskrat, arguing it violated trade and borrowing provisions. The Newfoundland Supreme Court dismissed it⁸.
- 2013 – Supreme Court of Canada. His appeal was rejected without a hearing⁹.
- 2013–14 – Political suppression. When Cabana sought a Liberal nomination, party insiders blocked him, citing questions about his mental health. CBC noted his persistence and called him a “curious case” who forced Muskrat into public debate¹⁰. The Independent later confirmed the nomination was blocked on mental health grounds¹¹.
- 2016 – Public smears. Former cabinet minister Percy French labeled him a “political scumbag” under oath in court¹².
Cabana never stopped — his blog posts remain as contemporaneous receipts — but the system’s message was clear: megaproject dissent would not be tolerated.
And in hindsight, he was right about Muskrat Falls.
Soft Budget Constraints: Bailouts Built In
Economist János Kornai coined the term “soft budget constraint” to describe what happens when governments or firms expect to be rescued from their mistakes. Once bailouts become the norm, discipline collapses, because everyone knows losses will be socialized².
Recent research by Xinli Guo (2025) shows how deeply this dynamic runs in Newfoundland: even at the municipal level, communities spend and borrow on the assumption that the province will step in later (Hi, Port au Port!)². What is true for towns and local service districts is even truer for megaprojects.
- Muskrat Falls was repeatedly propped up with federal loan guarantees.
- Wind and hydrogen developers now depend on federal subsidies and Paris-aligned finance.
- And now the Churchill Falls MOU continues the pattern.
The December 2024 MOU commits Newfoundland and Hydro-Québec to a 50-year deal. Rates paid for Churchill power will rise by roughly 2,850%, and Hydro-Québec will inject $3.5 billion for co-developing future projects³. Government leaders heralded it as historic, but critics quickly called it “the biggest strategic error in the province’s history.” Danny Williams, Ches Crosbie, Jack Harris, and others warned it hands Quebec a monopoly on Churchill River power⁴⁵. Facing backlash, the government announced an Independent Churchill Falls Negotiation Oversight Panel in January 2025⁶.
The logic is unchanged: external partners and higher tiers of government absorb the risk, embedding the expectation of the next bailout.
Why the Cycle Persists
Why does Newfoundland keep falling for the same trap?
- Political timelines. Announce the project, hire workers, cut the ribbon, and exit office before costs come due.
- Weak governance. Local councils and provincial institutions lack the strength to resist the lure of a grand promise (see Governance Without Teeth).
- Global finance. Paris-aligned capital and green-branded subsidies keep offering megaproject funding (see When the Bank Calls the Shots).
- Cultural reflex. Pride in “big projects” becomes part of identity, while dissent is cast as betrayal.
The Churchill Falls MOU illustrates every point. It was rolled out with fanfare, justified as a once-in-a-generation opportunity, and defended as inevitable. Yet its substance repeats the familiar recipe: external dependence, soft budgets, and deferred accountability.
Breaking Out of the Cycle
Van Assche notes that the first step in escaping path dependency is simply recognizing it. Newfoundland is caught in a loop, not because people are foolish, but because institutions, incentives, and culture steer them back to the same track.
There are alternatives: smaller, diversified projects; fiscal rules that enforce hard budget constraints; governance structures that look beyond electoral cycles.
But those alternatives remain hypothetical. Vested interests, financial pressures, and cultural reflexes make the cycle hard to break.
Until Newfoundland can resist the next “saviour project,” it will remain locked on the wrong track.
Crosslinks
References
[1] Van Assche, K. et al. The Local Paradox in Grand Policy Schemes. Scandinavian Journal of Public Administration, 2022. (local download) https://www.semanticscholar.org/paper/The-local-paradox-in-grand-policy-schemes.-Lessons-Assche-Greenwood/c0aeb6b909e3084b0e9a81d3f2733ee8816764f1
[2] Guo, X. Optimal Transfer Mechanism for Municipal Soft-Budget Constraints in Newfoundland. Memorial University, August 2025. https://arxiv.org/abs/2508.02171v3
[3] Wikipedia. Churchill Falls Generating Station – 2024 Memorandum of Understanding. https://en.wikipedia.org/wiki/Churchill_Falls_Generating_Station
[4] VOCM News. Churchill Falls MOU Handed Quebec a Monopoly, Say Critics. August 28, 2025. https://vocm.com/2025/08/28/278280
[5] Uncle Gnarley. Churchill Falls MOU: An Initial Assessment of the New Chapter. January 2025. https://unclegnarley.ca/2025/01/churchill-falls-mou-an-initial-assessment-of-the-new-chapter
[6] Government of Newfoundland and Labrador. Independent Churchill Falls Negotiation Oversight Panel Announced. January 27, 2025. https://www.gov.nl.ca/releases/2025/jps/0127n06
[7] Wikileaks. U.S. Consulate Halifax. Cable 05HALIFAX58: Lower Churchill Hydro Development. January 2005. https://wikileaks.org/plusd/cables/05HALIFAX58_a.html (Local Download)
[8] Newfoundland and Labrador Supreme Court. Cabana v. Newfoundland and Labrador (House of Assembly), 2012 NLSC 60. https://records.court.nl.ca/public/supremecourt/decisiondownload/?decision-id=11182&mode=stream
[9] Supreme Court of Canada. Brad Cabana v. Newfoundland and Labrador (House of Assembly), Docket 35171. May 2013. https://decisions.scc-csc.ca/scc-csc/scc-l-csc-a/en/item/19091/index.do
[10] CBC News. The Curious Case of Brad Cabana. February 2013. https://www.cbc.ca/news/canada/newfoundland-labrador/cochrane-the-curious-case-of-brad-cabana-1.1373079
[11] The Independent. Cabana Not Going Away. April 2014. https://theindependent.ca/news/cabana-not-going-away/
[12] SaltWire. French calls Cabana a “political scumbag” again, this time under oath. February 2016. https://www.saltwire.com/newfoundland-labrador/french-calls-cabana-a-political-scumbag-again-this-time-under-oath-126547
[13] Durham Region. Danny Williams courthouse caused concern. April 2011. https://www.durhamregion.com/news/danny-williams-courthouse-caused-concern/article_9da0d4eb-6188-5a36-bd1c-cf8b2bdb264c.html
[14] Brad Cabana. Rock Solid Politics Blog – Muskrat Falls Archive. https://rocksolidpolitics.blogspot.com/search/label/Muskrat%20Falls