Call made for government to provide update on Muskrat Falls financing
Infrastructure at the Churchill Falls generating station is seen in this file photo. Power from Churchill Falls is the target of a new court action from Hydro-Québec, but lawyers with the 2041 Group claim the case is relevant to the Lower Churchill development at Muskrat Falls. — Telegram file photo
By Ashley Fitzpatrick
A recent application by Hydro-Québec to the Quebec Superior Court is focused on the operation of the existing Churchill Falls hydroelectric plant but — the 2041 Group says — it is also important to the Lower Churchill development.
Lawyers Dennis Browne and Bern Coffey said Friday their opinion is the court case has the potential to affect water management on the Churchill River and ultimately the ability of Muskrat Falls to produce power as promoted.
Their arguments contradict statements made by the project proponent, provincial Crown utility Nalcor Energy.
On July 26, Nalcor’s Lower Churchill project lead Gilbert Bennett said the legal challenge would not negatively affect the Muskrat Falls development, regardless of the outcome.
He said water management on the Churchill River is important. Without some level of agreement on how the two hydro stations interact, the hydro facility at Muskrat Falls will have to “chase the flows” and produce more power as it can.
“Spills would be likely during the period of spring runoff, resulting in wasted energy,” states a 2009 filing from Nalcor Energy to the PUB.
However, Bennett said, the case launched by Hydro-Québec is not about water management. Instead, he said, it is about the details of the Churchill Falls power contract and interactions between Hydro-Québec and the Churchill Falls (Labrador) Corp. Ltd. (CF(L)Co).
Those corporations will be presenting their respective, detailed arguments on the case in court.
Yet the 2041 Group is arguing what is often referred to as the “water management agreement” for the Churchill River is not an actual agreement, but is instead an order of the regulator — the Public Utilities Board (PUB).
The PUB order was imposed despite Hydro-Québec and CF(L)Co being unable to come to an agreement on the subject.
So how does this relate to Hydro-Québec’s court action?
“They’re asking for a declaration on interpretations of the (1969 power) contract ... particular provisions of the renewal contract,” Coffey said. That renewal automatically comes into effect in September 2016.
“Now the water management agreement ... its application is not to adversely affect any provision of these other contracts,” he said.
The 2041 lawyers say Nalcor Energy cannot confirm the water agreement will not affect the operation of Churchill Falls under the renewal contract, until the courts determine just what the contract says.
Browne accused the Government of Newfoundland and Labrador with pressing forward, signing contracts for Muskrat Falls, when there were outstanding disputes over the management of water on the Churchill River.
“Only the courts can give legal certainty,” he said.
“It would have been prudent, given the magnitude of this project, to have gotten that legal certainty prior to spending any money.”
The 2041 group of lawyers said they believe the hunt for financing for the Lower Churchill build will be hurt by the court case.
They pointed to the federal loan guarantee, noting a stated condition was the federal government’s independent engineer review the technical aspects of the project, including “water resource,” before signing off.
Even if the loan guarantee is assured, they argued, uncertainty from the court case may keep potential investors at bay.
The idea was enough to prompt a statement from the provincial NDP Thursday.
The Telegram confirmed NDP leader Lorraine Michael discussed the topic with the 2041 Group before the statement was issued.
“Legal and financial experts tell me that financiers will be reluctant to commit billions of dollars to the project with the threat that the water to run it will be unavailable,” she said.
“This will mean the province is borrowing money, using our tax base as collateral. It’s a bit of an over-simplification, but this is similar to a bank being unwilling to give you a mortgage to buy a home if there is a dispute over the property title.”
The provincial Department of Natural Resources asked about project financing.
A statement provided on behalf of Minister Tom Marshall, says Nalcor Energy obtained multiple legal opinions of its own on the issues.
“This matter relates to interpretation of the 1969 (Upper Churchill) power contract and the renewed power contract, which will take effect in 2016, not the regulatory framework for water management in Newfoundland and Labrador and the Water Management Agreement between Nalcor Energy and Churchill Falls,” he stated.
“We have confidence in Nalcor’s analysis and planning. Nalcor has undertaken the necessary work in all areas of the project to demonstrate diligence to the independent engineer, lenders, and the federal government.”