On Our Radar: Will NL get a new deal on Upper Churchill power before 2041?

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In 1969, a power contract was signed between the Churchill Falls (Labrador) Corporation Limited (CFLCo) and Hydro -governing profits from the Churchill Falls hydroelectric development on the Upper Churchill River.

Muskrat falls

Over the years, the value of the power has grown and, according to repeated arguments made by CFLCo and the government of Newfoundland and Labrador, the result has been an unfair financial return to Hydro-Québec and the Quebec government as opposed to Newfoundland and Labrador.  Perhaps the most aggressive attempt to alter the status quo was in 1981, when the provincial government passed the Upper Churchill Water Rights Reversion Act, trying to take control of the Churchill Falls assets and, ultimately, get more money from Churchill Falls for Newfoundland and Labrador. In 1984, the Supreme Court of Canada shut down the province’s move and found its actions to be unconstitutional. The back-and-forth over Churchill Falls power was perhaps best summed up in a Department of Natural Resources publication in fall 2012: “The province has engaged in extensive litigation over the years in relation to the Upper Churchill; none has been successful.”

 

November 2009

    The so-called “good faith” legal argument begins, as the president of CFLCo sends a letter to the president of Hydro-Québec asking for a renegotiation of the pricing in the Upper Churchill power contract in the name of fairness. The argument is based on a requirement in Quebec civil law that parties to a contract act in good faith — and not “abuse their contractual rights” — through the life of a contract. In a news release issued Nov. 30, Nalcor Energy notes keeping the contracted power purchase prices would mean power being sold to Hydro-Québec for less than five per cent of its commercial value for another 32 years.

The status quo, the Crown corporation states, creates a disparity between the benefits for Quebec versus the benefits for Newfoundland and Labrador.

 

January 2010

    Two months later and, with no reply from Hydro-Québec, the president of CFLCo, Ed Martin (also president and CEO of Nalcor Energy), announces CFLCo will be taking its argument for more money from Upper Churchill power to the courts. “We believe the situation with the Upper Churchill Power Contract, as long as it is outstanding, to be unjust and to refuse to renegotiate the pricing terms is inconsistent with the obligation imposed by the law of Quebec to act in good faith in all legal relationships,” Martin says, promising to file a motion in Quebec Superior Court “in the coming weeks.”

 

February 2010

    The legal action is filed in Quebec courts by CFLCo. It must be filed in Quebec as the original contract is governed by the laws of Quebec.

 

September 2013

    The matter proceeds to trial. Sessions for the presentation of arguments are scheduled to continue through to the end of the year. A decision is expected by the end of 2014. According to Nalcor Energy, “appeals can be expected, regardless of the result, including possibly an appeal to the Supreme Court of Canada. This would likely take at least five years before the issue could be finally determined.”

 

 

The Telegram has been following this story for 3 years and 10 months

What we want to know:

Does the “good faith” argument have any merit?  

 

Who has the answer:

The judges of the Quebec Superior Court (to begin with).

Organizations: Hydro-Québec, Supreme Court of Canada, Nalcor Energy Department of Natural Resources Quebec Superior Court

Geographic location: Quebec, Newfoundland and Labrador

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Recent comments

  • Lucien Beauregard
    May 06, 2014 - 21:17

    Does the “good faith” argument have any merit? In it-self : No ! Because le Code Civil du Quebec doesn't allow a contract to be reopened. A contract is a contract ! However, in 1999, Hydro-Quebec and Nalcor made a Shareholder agreement which was by it -self a breach in the 1969 Contract. The Contract had been broken. Because of this pecedent, Quebec Judges are now allowed to make any other changes in the contract, this including the energy price.

  • Gobblygook
    September 21, 2013 - 13:28

    Obviously if the lawyers within Nalcor leave Martin to comment directly on the law, the good faith has little merit. If it did Gilbert Bennet would be all mouth about it. HQ has acted in just as good faith toward NL as Nalcor has toward Labrador people. What we will see soon is a collusion between our pig-iron-willed patsy come lately premiers, some unholy alliance that puts Labrador in worse shape after the megameal of contracts is over. All this was engineered to force NL power through quebec, same pipeline tactics, as transmission tactics. Next big one after christmas will be all the problems with ,aritime link. It is a script.