N.L. wants power deal reopened

Rob Antle
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CF(L)Co president cites 'good faith' aspects of Quebec law

This time, they say, it's different. Newfoundland and Labrador officials are again asking Hydro-Quebec to reopen the disastrous Upper Churchill power contract.

Previous efforts - efforts that have gone all the way to the Supreme Court of Canada - have failed.

Nalcor president and CEO Ed Martin speaks to reporters in St. John's Monday as he announces the company has asked Hydro-Quebec to reopen the Upper Churchill deal. - Photo by Keith Gosse/The Telegram

This time, they say, it's different. Newfoundland and Labrador officials are again asking Hydro-Quebec to reopen the disastrous Upper Churchill power contract.

Previous efforts - efforts that have gone all the way to the Supreme Court of Canada - have failed.

But now Nalcor Energy CEO and president Ed Martin says he has legal opinions from "eminent" Quebec lawyers saying the Quebec Civil Code could provide an opening to revisit the deal.

"It's fair to say that the enormity of the Upper Churchill power contract injustice is not lost on any citizen of Newfoundland and Labrador," Martin told reporters Monday.

Nalcor - the province's Crown-owned energy corporation - owns roughly two-thirds of Churchill Falls (Labrador) Corp., which operates the Upper Churchill power plant.

Under the terms of the 1969 power deal, Hydro-Quebec buys Upper Churchill power from CF(L)Co for rock-bottom prices.

Martin sent a letter to Hydro-Quebec president Thierry Vandal Monday, asking him to renegotiate pricing terms for the remainder of the agreement.

The contract runs until 2041.

Newfoundland and Labrador officials contend the province nets only $63 million a year from the lopsided arrangement, while Quebec receives an estimated $1.7 billion annually.

Martin said changes to Quebec law in 1994 impose obligations for "good faith" in all legal relationships, including contracts.

That law change applies to the 1969 Churchill deal, he indicated - not retroactively, but for the remainder of the contract.

Martin said CF(L)Co received legal opinions on the issue from Quebec lawyers, including former Quebec Court of Appeal judge Jean-Louis Baudouin.

Baudouin, Martin said, was actually involved in drafting the Quebec Civil Code.

That legal advice indicated CF(L)Co had grounds to ask Hydro-Quebec to reopen the contract because of its "gross inequity."

CF(L)Co has given Hydro-Quebec until Jan. 15 to reply.

Martin won't discuss what will happen if Hydro-Quebec doesn't respond, or simply says no.

Asked by reporters if that opens the door to a lawsuit, Martin said, "I'm going to avoid any talk of that, because that's just not the premise of starting off a good-faith discussion."

The current effort to renegotiate the deal began three years ago, Martin said, when provincial government lawyers began looking at "all avenues" available.

They recently outlined the "good faith" aspects of Quebec law to CF(L)Co, he noted.

Martin said CF(L)Co then sought its own legal advice - advice Martin said "compelled" him to move forward.

Premier Danny Williams said this attempt to engage Quebec in discussions on reworking the Upper Churchill is different from previous, failed, efforts.

"This is not just another letter," Williams told reporters at the legislature. "This is a pretty serious legal opinion. We're not just kind of throwing this out to create some hype so that people's expectations go up."

But does Williams really think Hydro-Quebec will come to the table for negotiations before Jan. 15?

"Well, there's billions of dollars at stake here," Williams said. "If we go to court - if whoever has to go to court, goes to court - under Quebec civil law and they're successful, then that means several billions of dollars out to the end of the contract.

"Given the stakes that are at risk here, any lawyer will say that (if) you can reach a good settlement, that's the right thing to do rather than throw it to the whim of the courts. And we feel we're on good legal ground, so we'll just have to see what happens."

Williams sought to distance his government from the CF(L)Co request, even though the company is controlled by the provincial government through its Crown-owned corporation, Nalcor.

The decision on how to proceed, Williams said, will be made by CF(L)Co.

"We're not in a position to be able to go put our thumb on them and say, 'This is the way you're going to vote.'"

Both Williams and Martin indicated there is a precedent in Quebec's civil law for CF(L)Co's request.

But neither provided details, and both indicated that information may need to be shielded from public disclosure.

Hydro-Quebec officials, meanwhile, declined comment.

rantle@thetelegram.com

Organizations: Hydro-Quebec, Supreme Court of Canada, Nalcor Energy CEO Churchill

Geographic location: Quebec, Newfoundland and Labrador

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Recent comments

  • Brett
    July 02, 2010 - 13:34

    I don't know about this. It seems like grasping at straws + an attempt at a populist measure. Are we not better off NOT being a pain in Quebec Hydro's behind? Are we attempting to throw more good money after bad?

    Will this not make life more difficult wrt negotiations for lower churchill?

    Yes 30 years to go with upper churchill... And that's a long time for everyone, but at least the end is visible.

    I`m not an apologist, I still think the deal was extortion but the courts have upheld the deal before, so do our feelings really matter, or are we better off just helping ourselves along and dealing with this from a position of strength later on.

  • Robert
    July 02, 2010 - 13:32

    NALCOR is also ''investing'' millions of dollars belonging to the citizens of NL in a politically motivated, extremely low proablility search for oil on the Northern Peninsula. I suspect that they will hit a ''dry well'' in this politically motivated exercise as well.

  • Just
    July 02, 2010 - 13:32

    I wonder if this pipe dream to have a do over on contracts runs both ways? Talk about a loss of credibility for the province when we are talking of contracts after the fact. Wonder how those who have current contracts with us view this event. I wonder if they think they are paying too much and will use this turnaround to demand a new contract to lower payments to the province. After all if it is good enough for the province to try to pull, then it sure is good enough for them.

  • Jordan
    July 02, 2010 - 13:29

    Wow all so negative this is probably whats wrong with us in Newfoundland and Labrador we had the Liberals in power for to long and we are not capable of optimism.

  • Truth
    July 02, 2010 - 13:26

    They can try just as I can try to win Lotto Max on Friday.

  • Taxpayer ll
    July 02, 2010 - 13:25

    At least the Premier is trying. At the very least it will bring some national attention to our plight, and may even help us with the lower churchill development. I doubt it will change anything, the french would riot in the streets if HQ renegotiated the deal, Charest is way too smart for that to happen.

  • P
    July 02, 2010 - 13:25

    The one thing we know for certain about this Provinces ongoing hydro-electric saga is that for lawyers on either side of the fence it is the gift that keeps on giving. We will probably never know the full costs of past as well as current efforts to rectify Smallwoods folly but it is well into the hundreds of millions of dollars and counting. The latest revelation from Nalcors Martin that CFLCo has asked Hydro Quebec to reopen the Upper Churchill contract is mesmerizing to the say the least. We are waiting on Quebec regulators for relief on the wheeling of Lower Churchill power; we dont need Quebec - we have the Anglo-Saxon route; we dont have the Anglo-Saxon route; we are awaiting Quebecs acceptance of our new water rights legislation; we dont need Quebecs acceptance we can ask our own PUB to approve a water management plan; we will go to war with Hydro Quebec; and now finally we will ask them to be nice. If they wont be nice, then maybe we will resort to some unspecified litigation under the Quebec Civil Code for relief. Phew!

    On its broad policy strokes since taking office, I support this government. Hanging tough with Exxon and others in the oil patch, improving NLs position with Vale-Inco, recovering water and timber rights from a near bankrupt Abitibi, and successfully pushing for fairness under the Atlantic Accord even its unsuccessful campaign against the federal governments Made-to-Screw-Newfoundland equalization formula. But when it comes to Labrador power I am left more often than not scratching my head.

    At times it is difficult to detect any thread of consistency or cohesion in the Provincial strategy. Ive been on roller coasters that had fewer ups and downs. Mind you, it didnt start with Williams. Rewriting or nullifying the Upper Churchill contract has been a preoccupation with almost every premier since Smallwood. Frank Moores dug two giant holes either side of the Straits at a cost of $50 million in a game of bluff with Hydro-Quebec. The Provinces only legitimate shot at overturning this insidious contract was the Water Rights Reversion Act which the Supreme Court of Canada struck down on the grounds it was ultra-vires (i.e. outside the Provinces legislative authority). That decision came as a shock to many constitutional experts who had long held the view that provinces were free to dispose of their own natural resources in accordance with the will of their legislatures. It was less a shock to hardened political observers who understood the vagaries of a Supreme Court bench stacked with judges from provinces with a vested interest (and which after 60 years of Canadianship, NL has yet to get a look in).

    Are there other legal grounds on which the original deal can be rescinded or modified. Perhaps. While the general common law sentiment is summed up in the phrase pecta sunt servanda (agreements must be kept though the heavens fall), there are exceptions. Among these is the principle of force majeure which might have come into play some years back when CFLCo approached the point where its operating costs almost exceeded its revenues. More promising is the concept of the unconscionable contract a contract that by reason of paltry consideration or absence of bargaining power is so inequitable as to be repugnant to the courts. Ironically the latter avenue might hold more promise if the Upper Churchill contract had been in perpetuity. These legal concepts make for interesting discussion but reliance on them in this case is tantamount to tilting at windmills. The same geopolitical forces and constitutional imbalances that have denied Newfoundland any semblance of fairness or justice since 1949 are hardly predisposed to start doing so now. No threats or pleas on the national stage however impassioned will change that, nor will the odd commentary in NLs favour from the Globes Jeffrey Simpson (as appeared this past week). Indeed there is only one circumstance in which the power to nullify such an egregious contract is beyond doubt - that only in the event that either of the political entities behind the contract was no longer bound by the dictates of the Supreme Court of Canada.

  • Micky
    July 02, 2010 - 13:24

    wheres my comment from yesterday?????

  • Frankie
    July 02, 2010 - 13:23

    While I am not one of the jingoistic cheerleaders in Danny's squad, I fully support his attempt to re-open the Upper Churchill contract ... it was and continues to be a blatant rip-off ... one which both Quebec and Canada should be ashamed to uphold ... Danny is doing the right thing as far as this contract is concerned and so should Quebec.

  • Truth
    July 02, 2010 - 13:21

    Taxpayer, I'd say it is, clearly. Seems not to be yours as you live in Danny's la la land, the sycophant you are.

  • Truth
    July 02, 2010 - 13:20

    Danny Williams put Martin there, the government (Williams) controls Nalcor and Martin, Nalcor and CF(L)Co own 2/3 of Churchill Falls.

    So, yeah, Danny, you do kinda control and put your thumb on them and tell them out to vote, to use your words. Do you think we are all idiots? We know who controls it all.

  • DB
    July 02, 2010 - 13:20

    At least they are trying to fix the screw up from days gone by.

  • martin
    July 02, 2010 - 13:20

    I can understand your frustrations about this contract. BUT at the time theres was a multitude of lawyers and politicians from NFLD who tough that it was a good deal for you. Now today, prices of energy went up faster than you tought in 1969, so you want HQ to change the deal. Why should we?
    The USA bought Alaska from Russia for 50 millions$, do you seriously think that Russsia is going to ask for more money today? You have to admit that it was cheap for buying the state of Alaska. But its business like the Churchill deal.
    Mister Williams should be less provocative with HQ im sure it will help for future negos.
    Thank you for reading me.

  • TaxWatch
    July 02, 2010 - 13:19

    If Quebec changed this CODE 15 years ago, where have our legal brains been for the last 15 years?????Even for the last 6 years?????

  • Taxpayer ll
    July 02, 2010 - 13:19

    Truth Teller, from reading your posts I would have to say realism isn't one of your strong points.

  • Nasty
    July 02, 2010 - 13:19

    I wonder when Danny is going to try this with the off-shore oil and gas industry to say he wants a bigger slice if the pie? A contract is just that. Get over it Danny.

  • Pearl
    July 02, 2010 - 13:16

    As long as Premier Williams is trying to make it right for the people of Newfoundland and Labrador, I'm behind him 100%. Someone has the guts to stand against the province of Quebec. Look at what's happening to the people of New Brunwsick. Quebec gives nothing away and that's the bottom line. The rest of Canada seems to be doing it.

    Come on Nflders and Labradorians, Premier Williams wants the best for us and our future generations. Let's stand behind him.

  • Max
    July 02, 2010 - 13:16

    Is our provincial government that narrowed minded that all they care to do is chase energy revenues? Are there no other folders that government needs to attend too? Is Danny Williams running a government or a law office at confederation building? Is there anyone in this country immune to being attacked by our provincial government? I mean I am all for additional revenues for our provincial coffers but at what expense?

    We have already lost any foothold with the federal government and now we have to go on the attack with other provinces. Regardless of our relationships with the existing federal government, do you think any court proceedings involving the province of Québec will ever rule against the Québécois? Any federal government would intervene just to appease the French. This in my mind is a total waste of resources and time and our provincial government needs to move on and work on other matters important to the people of this province.

  • Blue Ink
    July 02, 2010 - 13:15

    I fully support efforts by the Premier and Nalcor to reopen this contract.

    I can tell you Quebec's reply now though:

    Yeah Yeah Whatever.

    ... followed by giggles and laughter.

    Keep plugging away at it though guys!

  • Truth
    July 02, 2010 - 13:15

    *how to vote (typo)

    Jordan, it's not about optimism . It's about being realistic.

  • don
    July 02, 2010 - 13:15

    If it doesnt cost a fortune in legal fees-give it a shot. You never know.

  • Truth
    July 02, 2010 - 13:12

    How did Ed Martin get his cushy job? From being a Danny loyalist, supporter, friend??

  • Brett
    July 01, 2010 - 20:23

    I don't know about this. It seems like grasping at straws + an attempt at a populist measure. Are we not better off NOT being a pain in Quebec Hydro's behind? Are we attempting to throw more good money after bad?

    Will this not make life more difficult wrt negotiations for lower churchill?

    Yes 30 years to go with upper churchill... And that's a long time for everyone, but at least the end is visible.

    I`m not an apologist, I still think the deal was extortion but the courts have upheld the deal before, so do our feelings really matter, or are we better off just helping ourselves along and dealing with this from a position of strength later on.

  • Robert
    July 01, 2010 - 20:21

    NALCOR is also ''investing'' millions of dollars belonging to the citizens of NL in a politically motivated, extremely low proablility search for oil on the Northern Peninsula. I suspect that they will hit a ''dry well'' in this politically motivated exercise as well.

  • Just
    July 01, 2010 - 20:20

    I wonder if this pipe dream to have a do over on contracts runs both ways? Talk about a loss of credibility for the province when we are talking of contracts after the fact. Wonder how those who have current contracts with us view this event. I wonder if they think they are paying too much and will use this turnaround to demand a new contract to lower payments to the province. After all if it is good enough for the province to try to pull, then it sure is good enough for them.

  • Jordan
    July 01, 2010 - 20:17

    Wow all so negative this is probably whats wrong with us in Newfoundland and Labrador we had the Liberals in power for to long and we are not capable of optimism.

  • Truth
    July 01, 2010 - 20:13

    They can try just as I can try to win Lotto Max on Friday.

  • Taxpayer ll
    July 01, 2010 - 20:12

    At least the Premier is trying. At the very least it will bring some national attention to our plight, and may even help us with the lower churchill development. I doubt it will change anything, the french would riot in the streets if HQ renegotiated the deal, Charest is way too smart for that to happen.

  • P
    July 01, 2010 - 20:11

    The one thing we know for certain about this Provinces ongoing hydro-electric saga is that for lawyers on either side of the fence it is the gift that keeps on giving. We will probably never know the full costs of past as well as current efforts to rectify Smallwoods folly but it is well into the hundreds of millions of dollars and counting. The latest revelation from Nalcors Martin that CFLCo has asked Hydro Quebec to reopen the Upper Churchill contract is mesmerizing to the say the least. We are waiting on Quebec regulators for relief on the wheeling of Lower Churchill power; we dont need Quebec - we have the Anglo-Saxon route; we dont have the Anglo-Saxon route; we are awaiting Quebecs acceptance of our new water rights legislation; we dont need Quebecs acceptance we can ask our own PUB to approve a water management plan; we will go to war with Hydro Quebec; and now finally we will ask them to be nice. If they wont be nice, then maybe we will resort to some unspecified litigation under the Quebec Civil Code for relief. Phew!

    On its broad policy strokes since taking office, I support this government. Hanging tough with Exxon and others in the oil patch, improving NLs position with Vale-Inco, recovering water and timber rights from a near bankrupt Abitibi, and successfully pushing for fairness under the Atlantic Accord even its unsuccessful campaign against the federal governments Made-to-Screw-Newfoundland equalization formula. But when it comes to Labrador power I am left more often than not scratching my head.

    At times it is difficult to detect any thread of consistency or cohesion in the Provincial strategy. Ive been on roller coasters that had fewer ups and downs. Mind you, it didnt start with Williams. Rewriting or nullifying the Upper Churchill contract has been a preoccupation with almost every premier since Smallwood. Frank Moores dug two giant holes either side of the Straits at a cost of $50 million in a game of bluff with Hydro-Quebec. The Provinces only legitimate shot at overturning this insidious contract was the Water Rights Reversion Act which the Supreme Court of Canada struck down on the grounds it was ultra-vires (i.e. outside the Provinces legislative authority). That decision came as a shock to many constitutional experts who had long held the view that provinces were free to dispose of their own natural resources in accordance with the will of their legislatures. It was less a shock to hardened political observers who understood the vagaries of a Supreme Court bench stacked with judges from provinces with a vested interest (and which after 60 years of Canadianship, NL has yet to get a look in).

    Are there other legal grounds on which the original deal can be rescinded or modified. Perhaps. While the general common law sentiment is summed up in the phrase pecta sunt servanda (agreements must be kept though the heavens fall), there are exceptions. Among these is the principle of force majeure which might have come into play some years back when CFLCo approached the point where its operating costs almost exceeded its revenues. More promising is the concept of the unconscionable contract a contract that by reason of paltry consideration or absence of bargaining power is so inequitable as to be repugnant to the courts. Ironically the latter avenue might hold more promise if the Upper Churchill contract had been in perpetuity. These legal concepts make for interesting discussion but reliance on them in this case is tantamount to tilting at windmills. The same geopolitical forces and constitutional imbalances that have denied Newfoundland any semblance of fairness or justice since 1949 are hardly predisposed to start doing so now. No threats or pleas on the national stage however impassioned will change that, nor will the odd commentary in NLs favour from the Globes Jeffrey Simpson (as appeared this past week). Indeed there is only one circumstance in which the power to nullify such an egregious contract is beyond doubt - that only in the event that either of the political entities behind the contract was no longer bound by the dictates of the Supreme Court of Canada.

  • Micky
    July 01, 2010 - 20:10

    wheres my comment from yesterday?????

  • Frankie
    July 01, 2010 - 20:08

    While I am not one of the jingoistic cheerleaders in Danny's squad, I fully support his attempt to re-open the Upper Churchill contract ... it was and continues to be a blatant rip-off ... one which both Quebec and Canada should be ashamed to uphold ... Danny is doing the right thing as far as this contract is concerned and so should Quebec.

  • Truth
    July 01, 2010 - 20:05

    Taxpayer, I'd say it is, clearly. Seems not to be yours as you live in Danny's la la land, the sycophant you are.

  • Truth
    July 01, 2010 - 20:04

    Danny Williams put Martin there, the government (Williams) controls Nalcor and Martin, Nalcor and CF(L)Co own 2/3 of Churchill Falls.

    So, yeah, Danny, you do kinda control and put your thumb on them and tell them out to vote, to use your words. Do you think we are all idiots? We know who controls it all.

  • DB
    July 01, 2010 - 20:03

    At least they are trying to fix the screw up from days gone by.

  • martin
    July 01, 2010 - 20:02

    I can understand your frustrations about this contract. BUT at the time theres was a multitude of lawyers and politicians from NFLD who tough that it was a good deal for you. Now today, prices of energy went up faster than you tought in 1969, so you want HQ to change the deal. Why should we?
    The USA bought Alaska from Russia for 50 millions$, do you seriously think that Russsia is going to ask for more money today? You have to admit that it was cheap for buying the state of Alaska. But its business like the Churchill deal.
    Mister Williams should be less provocative with HQ im sure it will help for future negos.
    Thank you for reading me.

  • TaxWatch
    July 01, 2010 - 20:02

    If Quebec changed this CODE 15 years ago, where have our legal brains been for the last 15 years?????Even for the last 6 years?????

  • Taxpayer ll
    July 01, 2010 - 20:02

    Truth Teller, from reading your posts I would have to say realism isn't one of your strong points.

  • Nasty
    July 01, 2010 - 20:01

    I wonder when Danny is going to try this with the off-shore oil and gas industry to say he wants a bigger slice if the pie? A contract is just that. Get over it Danny.

  • Pearl
    July 01, 2010 - 19:56

    As long as Premier Williams is trying to make it right for the people of Newfoundland and Labrador, I'm behind him 100%. Someone has the guts to stand against the province of Quebec. Look at what's happening to the people of New Brunwsick. Quebec gives nothing away and that's the bottom line. The rest of Canada seems to be doing it.

    Come on Nflders and Labradorians, Premier Williams wants the best for us and our future generations. Let's stand behind him.

  • Max
    July 01, 2010 - 19:56

    Is our provincial government that narrowed minded that all they care to do is chase energy revenues? Are there no other folders that government needs to attend too? Is Danny Williams running a government or a law office at confederation building? Is there anyone in this country immune to being attacked by our provincial government? I mean I am all for additional revenues for our provincial coffers but at what expense?

    We have already lost any foothold with the federal government and now we have to go on the attack with other provinces. Regardless of our relationships with the existing federal government, do you think any court proceedings involving the province of Québec will ever rule against the Québécois? Any federal government would intervene just to appease the French. This in my mind is a total waste of resources and time and our provincial government needs to move on and work on other matters important to the people of this province.

  • Blue Ink
    July 01, 2010 - 19:55

    I fully support efforts by the Premier and Nalcor to reopen this contract.

    I can tell you Quebec's reply now though:

    Yeah Yeah Whatever.

    ... followed by giggles and laughter.

    Keep plugging away at it though guys!

  • Truth
    July 01, 2010 - 19:55

    *how to vote (typo)

    Jordan, it's not about optimism . It's about being realistic.

  • don
    July 01, 2010 - 19:54

    If it doesnt cost a fortune in legal fees-give it a shot. You never know.

  • Truth
    July 01, 2010 - 19:49

    How did Ed Martin get his cushy job? From being a Danny loyalist, supporter, friend??