Court case crucial to Lower Churchill: lawyers

Ashley Fitzpatrick
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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

The Telegram

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.

Challenging Nalcor

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.”

Money matters

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.”

Organizations: Hydro-Québec, Quebec Superior Court, Public Utilities Board Department of Natural

Geographic location: Churchill River, Newfoundland and Labrador

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Recent comments

  • Gerry
    August 05, 2013 - 15:29

    Hydro Quebec going to Quebec court????? The renewal contract is auto in 2016????? It would be nice if there was no renewal agreement. What will happen when Quebec becomes a non part of Canada ( and it will some day) ?????

  • Jon Smith
    August 05, 2013 - 13:13

    Shooting the messenger just doesn't cut it anymore, John. Quebec continues to be relentless in protecting the rights of its citizens. Nova Scotia is proving equally relentless in protecting the price and security of supply for its citizens. The major flaw of Muskrat remains its price competiveness - the proof is that it is approximately 4 to 5 times the cost of Quebec's Romaine River. The weak kneed PC federal government, (having been heavily ABD'd), have put Nova Scotia in the driver's seat on the loan guarantee and will never gather the guts to tackle Quebec on interprovincial electricity transmission. Meanwhile Nalcor and our own government say everything is sensitive and must be kept from its citizens but everything is Ok, we are in control of the great chess game. The great big problem is that it is doubtful that anybody believes it. Have the Newfoundland and Labrador citizens got anybody protecting their rights, security of supply and price- it sure does not look a whole lot like it.

  • John Smith
    August 04, 2013 - 09:35

    One thing about this group of lawyers I could never understand is why haven't they taken their case to court? They like to trot it out to the media every time there is a court case, or an issue regarding the project, yet never want to go to court, as did Cabana. Court challenges are normal on projects of this size, and everyone knew HQ would do what they could to stymie our efforts. With the end of the UC contract in sight the last thing HQ wants is for us to successfully transmit power without their say so for the first time in our history.I find it amusing that we listen to the likes of the 2041 group, every time they make an appearance, yet Nalcor, and all the firms and people who work for them are dismissed, like what they have to say not important to the conversation. I think I am beginning to understand the relationship between the media, and the 2041 group...mutually parasitic...

  • pH
    August 04, 2013 - 04:54

    This should be impartial. HQ appealing to a Quebec Court.

    • Darryl
      August 10, 2016 - 20:48

      Why not? This was all spelled out in the Power contract of 1969: "1.2 Applicable Law This Power Contract shall at all times and in all respects be governed by, and interpreted in accordance with, the laws of the Province of Quebec." Even after 2041, Hydro-Quebec still owns 1/3 of all profits that cflco generates. You are still going to have to deal with HQ sooner or later.

    • Darryl
      August 10, 2016 - 20:49

      Why not? This was all spelled out in the Power contract of 1969: "1.2 Applicable Law This Power Contract shall at all times and in all respects be governed by, and interpreted in accordance with, the laws of the Province of Quebec." Even after 2041, Hydro-Quebec still owns 1/3 of all profits that cflco generates. You are still going to have to deal with HQ sooner or later.

  • Foghorn Leghorn
    August 03, 2013 - 09:08

    Yet again another example of our powers to be rushing headlong into a major development without doing the proper due diligence. You simply do not risk billions of taxpayers dollars like you are playing some sort of high stakes poker game. Ah yes, the legacy of Danny Williams, maybe he will be remembered for the the Icecaps and Dannyland instead?