UPDATE: Hydro-Quebec move 'desperate,' says premier

James
James McLeod
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Heavy machinery works at the site of the Muskrat Falls hydro project next to the Lower Churchill River in May.
— File photo by Derek Montague/The Labradorian

Premier Kathy Dunderdale describes the Hydro-Quebec move as "desperate" in challenging the Muskrat Falls development.

"This is not the first time we have come head to head... But the agenda won't be set by Quebec,” she told reporters during a noon-hour media availability.

On Monday, Hydro-Québec filed a court application that appeared to be aimed at the Labrador hydroelectric development.

It said in a news release that it’s asking the Québec courts for a declaratory order confirming several core rights contained in the 1969 Churchill Falls power contract.

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(Earlier story)

Hydro-Québec takes aim at Muskrat Falls

The future of the Muskrat Falls project appears to be in jeopardy after Hydro-Québec filed a court application which appears to be aimed directly at the Labrador hydroelectric development.

The news release from Hydro-Québec didn’t explicitly mention Muskrat Falls at all, but the legal action is something critics have been warning about since last year, and it may threaten to scupper the whole project.

Hydro-Québec says in its news release it’s asking the Québec courts for a declaratory order confirming several core rights contained in the 1969 Churchill Falls power contract.

“Under the terms of the Contract which Hydro-Québec and CF(L)Co concluded in 1969, Hydro-Québec has certain essential rights, including: The exclusive right to purchase virtually all of the power and energy produced by Churchill Falls Generating Station until August 31, 2041; (and) the right to benefit from

operational flexibility,” the release states.

Essentially, the Newfoundland and Labrador government has made moves to assert that Muskrat Falls and Churchill Falls operate as an integrated system.

The plan is to make sure that Québec gets all of the electricity it’s entitled to, but to run the two hydroelectric dams in a way to manage water flow and use the Churchill Falls reservoir for storage during dry portions of the year.

Lawyers in this province have been speaking out on this issue since last fall, saying that the Water Management Agreement imposed by the Public Utilities Board wouldn’t hold up in court.

The release from Hydro-Québec doesn’t explicitly reference the Water Management Agreement, but it says moves made by CF(L)Co would limit its “operational flexibility” and therefore it is legally invalid.

Bern Coffey, one of the lawyers who has spoken extensively about this, said he’s not surprised to see the legal action coming from Hydro-Québec, but he said that until the case is resolved in the court system — right up to the Supreme Court of Canada — Nalcor needs to stop spending money on building Muskrat Falls.

“Frankly, why would you spend any money in the meantime?” Coffey said.

“Unless you can enforce that water management agreement against Hydro-Québec, it won’t financially work.”

Last fall, when Coffey was speaking extensively about these issues, both the Newfoundland and Labrador government and Nalcor insisted that they had legal opinions indicating that the Water Management Agreement was not an issue.

Gary Sutherland, a spokesman for Hydro-Québec, stuck to what was stated in the company’s news release when asked by The Telegram if its legal action was influenced by continued development of the Muskrat Falls project.

“This is a request to the courts to interpret the Churchill Falls contract (from 1969),” he said. “This is really to confirm that CFLCo’s positions on a couple of issues that we detailed in the press release are not founded.”

Tom Marshall, minister of natural resources and attorney general, said he wasn’t sure whether the Hydro-Québec application is part of one of the court cases that are already going on between Newfoundland and Labrador and Québec — there are two different cases already underway.

“There’s an application for a declaratory order. It’s in French. We’re seeking to have it translated into English so we can have an understanding of what they're looking for, what case it’s arising out of,” Marshall said.

 “CF(L)Co and Nalcor are involved in a number of actions. One is a good faith case. Another one involves the Regie. I mean, until I know where this is coming from, obviously, I couldn’t comment.”

Marshall said that because the Hydro-Québec court challenge was specifically aimed at CF(L)Co — the company jointly owned by Nalcor and Hydro-Québec which operates the Churchill Falls facility — the Newfoundland and Labrador government won’t get directly involved in the case, and it will leave it to CF(L)Co to deal with it in court.

“It’ll be the lawyers with CF(L)Co that’ll be dealing with this,” he said.

Nalcor CEO Ed Martin was asked about the case at an afternoon media availability, but said he couldn’t comment on it until he had more information.

Liberal energy critic Dwight Ball said the case raises some pretty significant questions about the future of the Muskrat Falls development.

“What impact will this have on financing this project? Will people step up to the plate and finance this?” he said.

New Democrat Leader Lorraine Michael went further, saying that the court challenge may be enough reason to put the brakes on development altogether.

“Nalcor has continually insisted that there is no legal case here,” she said. “Hydro-Québec believes it has a case, obviously. They wouldn’t waste money if they didn’t think they had a case.”

 

— With files from Andrew Robinson

jmcleod@thetelegram.com

Twitter: TelegramJames

 

 

Organizations: Hydro-Québec, Churchill Falls Generating Station, Public Utilities Board Supreme Court of Canada

Geographic location: Muskrat Falls, Newfoundland and Labrador, Québec

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  • Don II
    July 23, 2013 - 16:05

    Premier Dunderdale's bravado is not an appropriate response to this very serious situation. It appears that she does not grasp the gravity of this situation and that is very troubling indeed. There is no guarantee that the Government of Newfoundland will prevail against Hydro Quebec in Court. As things currently stand regarding the situation with Quebec and Nova Scotia there is no longer any guarantee that Muskrat Falls project will proceed as planned! Premier Dunderdale appears to be oblivious to that possibility and the potential for very negative financial consequences. The Premier had nothing to offer but a poorly considered attack on Hydro Quebec. It appears that the Premier is starting to circle the wagons. That is not a good sign. The people in Newfoundland and Labrador are always kept in the dark by a highly secretive Government. We do not really know what Hydro Quebec's legal argument is based on. Hydro Quebec may have cards to play in Court that the Government of Newfoundland does not. We do not really know what went on behind the scenes back in 1969 regarding the Upper Churchill deal and water rights etc. or even what the Government of Newfoundland actually agreed to back then. It appears that the long standing propensity of the Government of Newfoundland to act before thinking about consequences, to accept bad legal advice, to ignore the rule of law and to act like a very overbearing bully in its dealings with other Sovereign States, corporations and individuals alike may have finally picked a fight with opponents that it cannot beat!

    • david
      July 24, 2013 - 11:57

      When BS and bravado is all you got, it's BS and bravado that you use. Newfoundland is the perennial "cat backed into the corner". We never learned any other skills of self-preservation, which is why we're laughed constantly laughed at by the rest of Canada. And that little moment when we finally had 50 cents in our pockets didn't exactly ingratiate us with them, either...what condescending aholes we were for all of 45 minutes, eh Danny?

  • JackieLogans
    July 23, 2013 - 14:29

    I would add that Quebec's BEGGAR-THY-NEIGHBOUR attitude is quite disgusting, and their actions are indeed unconscionable.

  • david
    July 23, 2013 - 14:21

    Quebec is desperate...riiiight. Quebec is running scared from the intellectually unmatched, technically superior, politically astute, historically shrewd, strategically cunning, legally astute Newfoundland government. Bwa ha ha ha ha....

  • JackieLogans
    July 23, 2013 - 13:56

    Make sure that Danny Williams is on the legal team representing Newfoundland & Labrador. This isn't the time to have incompetent lawyers -- such as was the case when the original Churchill Falls fiasco was drawn up, approved by "The Only Living Father" (at the time), then signed and sealed -- without an opening price-adjustment clause -- as a ninety-percent giveaway to the "Nation of Quebec" until the year 2041. The mind boggles just thinking about it.

    • Tony Rockel
      July 23, 2013 - 14:47

      If Danny is such a red hot lawyer, then how did he get us into this mess in the first place? Maybe his inflated ego got in the way of his common sense.

    • jackielogans
      July 23, 2013 - 15:13

      TONY: This mess, as you call it, can be traced all the way back to the inflated ego, to use your phrase, of JOSEPH ROBERTS SMALLWOOD. It was his megalomania which set the stage for the whole Churchill Falls/Muskrat Falls imbroglio. Never forget that, at heart, Joey was just a salesman interested in making and closing a deal, details and consequences notwithstanding. And it was Danny Williams who stood up for the tenth province, vowing to end an ongoing Newfoundland government legacy of giveaways.

    • Tony Rockel
      July 23, 2013 - 15:56

      Jackielogans, Yes, I am acquainted with the odious behaviour of our pocket-dictator Joey Smallwood and his flat-out megalomania, but I still maintain that Danny's behaviour has many of the same elements. Why did he push for Muskrat falls and then promptly resign from the premiership? Isn't that a bit self-serving? Getting back at Quebec is fine by me, as long as we are not caught in the crossfire, which is what seems to be happening now.

    • JackieLogans
      July 25, 2013 - 03:41

      To answer Tony's question: As I understand it, Danny Williams resigned as Premier for health reasons. And I wish him Good Health & Good Fortune. He served Newfoundland & Labrador very well indeed. For one thing, he put an end to the "Up-along Crowd" laughing at the tenth province.

  • Bewarefog
    July 23, 2013 - 12:36

    This challenge by Quebec seems to be well founded and has some logic behind it. We will have to wait and see however. One can only hope the CFLCo lawyers are not the same ones that accidentally appropriated the GFW mill. The MF deal was structured by Nalcor as 20% of capacity to Emera, in exchange for the construction of the Link, 40% for replacement of Holyrood, and 40% available for export. Here are some numbers for us in NL to consider...The cost to NS for construction of the Link...$ 1.52 billion. This cost is spread over 35 years. NS Power has 488,000 customers who will pay that cost. There will be no further benefit to NL for the 20% of the output of MF, for the 35 years, no matter what happens to energy prices. After 35 years, ownership of the link returns to Nalcor, when we now, hear that the cables may have to be replaced. The remaining cost of the MF project which will be at least $ 6-8 billion, will be paid for by NL ratepayers. There is a 57 year PPA in place which was needed to make this project fly. NL Power has only 250,000 customers who will pay for MF. There is 40% of the output that is for 'export'. The NSUARB decision yesterday makes this possibility even murkier. You have to do your own math.....because Nalcor and Dunderdale will not tell us how much our rates will increase. You can be sure that the sticker shock will be horrendous, if the Government does not heavily subsidize the rates.....which is akin to telling us the time with our own watch. Don't forget that they have managed to get the NL PUB completely eliminated from the rate setting process for Nalcor and NL Hydro. Cabinet will juggle all these numbers without our knowledge. Remember Bill 29 and other secrecy measures? I'm sure Ed Martin is a fine fellow, but his statement yesterday that the NSUARB decision was just an indication of increasing demand for Nalcor product, and presents a great opportunity - is pure motherhood. The whole world wants hydropower....the real question is...at what price and who pays?....and Ed Martin reports to a Board appointed by Dunderdale's cabinet. Anyone feeling better about MF now?

  • Bob
    July 23, 2013 - 12:33

    Were Blunderdale's two "toughs", Kennedy & Marshall at her side, frantically waving the Newfoundland flag? I wish Quebec would just separate but Blunderdale's bullheadedness and stupidity on Danny William's legacy is the all-time disgrace for Newfoundland & Labraror.

  • Tony Rockel
    July 23, 2013 - 12:23

    Hydro Quebec "desperate"? I'd say it's Blunderdale and her bevy of boneheads in the Confabulation Building that are the desperate ones!

  • gerry
    July 23, 2013 - 12:16

    while I may not agree with John Smith's post; your, 'Take a long walk on a short plank Smith' reply...- intelligent comeback 'Bob'; I recommend you stick to observing & reading comments'......

    • Bob
      July 23, 2013 - 13:38

      D'as what I'm doing Gerry b'y. All dat readin' & observin' is what prompts my comments. No need to get y'er petticoat in a bundle.

  • Kathy's Bunker Mentality
    July 23, 2013 - 12:15

    We have not heard from awhile. Then she appears with her rhetoric, spouting off on a legal situation of which she has no expertise at all. At least she didn't play the Grandmother card again. We must take this challenge seriously as we have suffered from poor due diligence in respect of our own legal work on the Upper Churchill contract. She can go back to her Happy Place now.

  • Jon Smith
    July 23, 2013 - 11:59

    Hydro Quebec is asking for confirmation of the decisions of the supreme court in the province of Quebec and ratified by the Supreme Court of Canada when the Peckford Water Rights Reversion Act was struck down. Expect the result to be an equivalent ruling " that this province cannot do anything that impacts Quebec contractual rights under the Upper Churchill Contract". To fail to negotiate and agree on any and all possible impacts with Quebec before entering any contract with Nova Scotia/Emera is absolutely irresponsible on the part of the government of Newfoundland and Labrador.

  • Newfoundland First But No faith in Dunderdale
    July 23, 2013 - 11:29

    I hope we don't get done over again but this uneducated and unqualified premier. Add to that a lacklustre Dept of Justice (they recommended to Dunderdale the faulty expropriation of the mill in Grand falls that we have to pay the cost of environmental cleanup). When will we learn that multiple Newfoundland governments of both stripes have been done over in the courts due to their homegrown legal counsel. The legal barracudas of Toronto, Montreal and New York City are hostile and put our lawyers to shame. For that reason alone, I am frightened for Newfoundland and cannot believe anything Dunderdale has to say on this subject.

  • Henriette
    July 23, 2013 - 11:26

    You can blast Quebec for this mess all you want but just think if NL would have come up on a deal like QC did in 1969, you try to tell me that NL wouldn't have accepted it? Wake up NL!! It's the NL government who sold that deal to QC and QC bought it!! If I go to Walmart and see a great deal I'll buy but I've never heard Walmart crying over it. NL will be screwed not only by Hydro Quebec but also by Nova Scotia .'s greed but it's never NL's fault ; it's always someone else and never the stupidity of the Newfoundland government for always giving away its resources. This province is heading for a big hole that it dug itself! Newfoundland is Ottawa's foodbank!

  • Jay
    July 23, 2013 - 11:14

    I can't wait for the Liberals or NDP to get elected to see their real stance on Muskrat Falls. They'll forge ahead with this project, all the while blaming the Tories, but they will go ahead with the project.

    • Eli
      July 23, 2013 - 12:21

      Maybe you can tell 'em what good it would do to lock up the horse after the barn is stolen.. Get a life man.

    • Robb
      July 23, 2013 - 14:04

      Hey Eli...get a life?...you get a life.......you jokers seem to think that the ndp or the liberals would stop this project if they were in power....what a joke........both of these low balling parties would forge ahead with this project, and you winners know it....the ndp and liberals are just that....as low as it gets, just to get in power, but this project will never stop, and asking someone to get a life is just plain stupid.

    • Jay
      July 23, 2013 - 19:23

      Eli, If you'd bother to do some remedial reading lessons, maybe you'd know that the powerful Liberals and NDP have supported this project from the beginning. Eddie Joyce and the rest of the Liberal village idiots get the attention they deserve (none) They just don't want to take any political heat. But keep supporting Danny D. He'll save you. Maybe he'll get you a life too.

  • Leadership Void
    July 23, 2013 - 10:31

    This project is being pursued at all costs. Why? A legal challenge could kill it, NS wants absurdly low market rates for most of the power, NL doesn't need the power, the project is too expensive, it can't compete with low cost natural gas in US markets, the North Spur is a major engineering problem, SNC has been involved in Criminal Activity, local heating demand could even eliminate the need for Holyrood, there is more untapped hydro on the island than Muakrat Falls has if we wanted to develop it, large payments to Nalcor just in time for austerity .... What drives this insanity? We need to cut our losses and move on.

  • Foghorn Leghorn
    July 23, 2013 - 09:58

    We had an ego maniac of a premier, Danny Williams, who did not want to deal with Hydro Quebec on our current, or future power needs. Come hell or high water, no pun intended, Muskrat Falls was going to be built to try and rub it into the noses of Hydro Quebec. Now only time, and money will tell where the chips may fall after this potential fiasco. Heaven help our grandchildren with the financial mess we are going to leave them!

  • dupce
    July 23, 2013 - 09:42

    I find this court case from Hydro Quebec most interesting. I get the feeling that Churchill Falls (Labrador) Corporation Limited of which is 34.2% owned by Hydro Quebec and 65.8% own by the NFLD government may have painted itself in a corner. Back in the 70’s the NFLD government took Hydro Quebec to the Supreme Court of Canada and lost their case to change the contract. This time with Hydro Quebec taking the CF(L)Co to court and knowing them, the government of NFLD is going to learn one fundamental lesson, the approach “à la Danny Williams” does not work: -You can’t go to New York, Toronto and Calgary insulting government of Quebec (Jean Charest). -You can’t go to the province of New Brunswick and sink an agreement between Hydro Quebec and NB Power. -You can’t go out publically insulting French Canadians. All this while thinking that there will be no consequences to your actions, it’s rather immature. Danny Williams may have given a great feeling of belonging and pride to Newfoundlander, but now the chicken is coming back to rouse. I said during Danny Williams outings that if thought he was having problems with Jean Charest Liberal government, wait when the Partie Quebecois would come to power.

  • Ellsworth Penney
    July 23, 2013 - 09:24

    Interesting Article!! But I am drawn to the comments made by Bern Coffey where he states that "Until this issue is resolved in our Courts and Right up to The Supreme Court of Canada -- Nalcor needs to stop building money on building Muskrat Falls. I would like to ask Mr. Coffey if him and group were so sure and had opinions on this why did they sit back and not try and do more to stop it for the sake of his Fellow Citizens. I had opportunity to sit in the The Court Room on June 4th when part of the Application was being heard seeking an injunction to halt this project until such time until the very thing Mr. Coffey refers to is cleared up. Mr. Coffey appeared and sat in the Court Room for a Very Brief time and left. Come on Mr. Coffey it takes more than that to get an injunction.

  • Don II
    July 23, 2013 - 09:00

    The Government of Newfoundland may have assumed that Nova Scotia would be much easier to deal with and outfox than Quebec had proved to be in the past. It now appears that Nova Scotia wants a large piece of the hydro electric pie and has Newfoundland and Labrador over the proverbial barrel just like Quebec does. It appears that the lawyers who warned the Government of Newfoundland that Hydro Quebec would attempt to enforce its water rights agreement were right after all. In its haste to build the Muskrat Falls project and obtain a deal for a subsea cable to Nova Scotia in order to show Hydro Quebec that Newfoundland and Labrador can and will wheel power to the USA without having to go through Quebec, the Government of Newfoundland may have stepped on a financial, legal and political landmine. It appears that the Government of Newfoundland is run by arrogant people who are driven by a political and corporate natural resources development agenda. It appears that they do not care about the fact that other parties have rights and that they should be negotiated with honestly and treated fairly with respect. It appears that the ethical approach to dealing with other people is a foreign concept within the walls and secret meetings in the board rooms of Confederation Building. The Government of Newfoundland attitude is similar to a man who insists on building a house despite his lawyer advising him not to do it. The man insists that he will build his house come hell or high water and his lawyer had better mind his own business. What is the lawyers problem anyway the man asks? The lawyer replies that he can build his house if he wants but he must understand that he is building his house on land that is half owned by someone else and that will be a problem when he attempts to obtain a mortgage without the other persons consent! Will the man buy out the other persons interest in the land or share the house with the other owner or just go ahead and build his house on part of the other owners land without the other owners consent and take possession of the house at his peril? It appears that legal and fairness issues did not concern the Government of Newfoundland when it barged ahead in 2008 with expropriating Abitibi and in the process breached the North America Free Trade Act. After breaching NAFTA the Government of Newfoundland saddled the Government of Canada with the responsibility and a $200 Million bill to settle the matter with Abitibi. It appears that this irresponsible and arrogant attitude prevails amongst the power brokers in Confederation Building that has been unchanged by the high cost of past mistakes. No ground should have been broken nor any tree cut down at Muskrat Falls before all of the issues and concerns of the parties involved had been openly and honestly dealt with. The end result of the bull in the china shop mentality regarding barging ahead with Muskrat Falls could potentially be a financial, legal and political disaster that will make the cost of breaching NAFTA when it ambushed Abitibi pale in comparison. The power brokers who run the show at Confederation Building and at Nalcor should seriously reconsider the possible worst case scenarios and ramifications of the court case being pursued by Hydro Quebec and the ruling of the Nova Scotia Public Utilities Board before they arrive at the point of no return! It appears that the Muskrat Falls deal was concocted by the same power brokers who expropriated the polluted Abitibi pulp mill by mistake. That incompetent error cost the Government of Newfoundland and tax payers a fortune to acquire and clean up an environmentally toxic pulp mill! The lemmings do not look or listen before they leap and will always follow their leader off a cliff.

    • dupce
      July 23, 2013 - 09:49

      @DON II This is a very good overall view of the political situation on the Rock. I just wish Newfoundlanders would be more conscious of what you are saying and that people on the main land have been watching the Governments of Newfoundland miss-management since it joined the Confederation in 1949.

    • Eli
      July 23, 2013 - 13:31

      I seem to recall a column by Ray Guy many years ago wherein he made no secret he wouldn't trust Nova Scotians with a 10-foot pole.l

  • Jon Smith
    July 23, 2013 - 07:43

    There is a man out there with invaluable knowledge about this matter who could be brought in to provide assistance to the PC government at this time. He has been snubbed badly by the PC's but he may still help. His name is Brian Peckford. Would the PC government ever consider such a smart move- doubtful, smart moves has not been their norm.

    • Eli
      July 23, 2013 - 09:22

      Why bother? Dunderdale, Kennedy, and S'martin don't want to hear anything that will cloud their tunnel vision. If I had my way they'd all be sent to Lundrigan's Lumber Camp on the moon.

  • John Smith
    July 23, 2013 - 07:06

    Interesting that Lorraine wants to stop the project right away...bow to Quebec, and Dwight wants to muddy the water by casting doubts on financing...two proud Newfoundlanders...give me a break. I wouldn't doubt if Bern Coffey and his cronies sent letters to HQ urging them to persue this course of action...it would not surprise me at all...more great newfoundlanders...LOL They have access to power...not water...and that is the bottom line....

    • Bob
      July 23, 2013 - 08:53

      Take a long walk on a short plank Smith.

    • Tony Rockel
      July 23, 2013 - 10:44

      More of the usual drivel from Nalcor's favourite toady. MF still "on time and on budget", "John"?

    • Robb
      July 23, 2013 - 14:14

      Right on John Smith.......and oh, by the way, don't mind the grade 1 level of intelligence of Bob.......take a walk....???.....pretty childish, but that's grade 1 for you.......now, on to something intelligent, you are correct John Smith, if anyone thinks that Lorraine or Dwight would stop this now or ever is dreaming. Of course, the dingbat ndp and liberal cronies will be stirring up this pot forever....same old, same old....

  • Maurice E. Adams
    July 23, 2013 - 06:27

    Finally, a leader who is actually providing leadership ---- and is justifiably raising the prospect of putting the breaks on Muskrat Falls.

    • Frank
      July 23, 2013 - 10:45

      Lorraine, a leader? She would hand the whole thing over to Quebec..

  • Brad Cabana
    July 23, 2013 - 05:56

    Hard to fathom why James Macleod wouldn't reference the only lawsuit happening in the province seeking to put an injunction in place to stop Muskrat Falls based on the water management agreement. I guess his spite knows no bounds. Either way, this wednesday will mark the eighth week waiting for a decision on that injunction. Did enjoy the interview with the bureau chief, Ottawa, of the Chronicle Herald yesterday though.

    • brad your five minutes are up
      July 23, 2013 - 09:17

      brad cabana; your five minutes are up; please exit quietly; and I thought you wanted to be leader; the liberals are looking for one; where are you;