Newfoundland and Labrador to appeal Quebec ruling on Churchill Falls hydro deal

The Canadian Press
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The government of Newfoundland and Labrador said today it will appeal a Quebec Superior Court ruling that strikes down its bid to renegotiate a 1969 deal it says drastically under-prices power from the Churchill Falls hydro plant.

Premier Tom Marshall. — Telegram file photo

The case was launched in February 2010 after Hydro-Québec rebuffed a call from the Newfoundland and Labrador government to reopen the contentious agreement.

Its terms have been a source of friction between the two provinces for decades.

Premier Tom Marshall of Newfoundland and Labrador said legal advisers support continuing a fight that has so far cost taxpayers about $4 million.

The province’s latest argument that Quebec has a “good faith” duty to recognize how unforeseen pricing escalations have created what it calls grossly unfair terms could reach the Supreme Court of Canada, he said.

“I think any government and any premier would be negligent if they didn’t pursue to right this wrong on behalf of the people of the province when there’s an opportunity to do so,” he said in an interview.

“If we’re successful, the revenue gains will be tenfold what the costs have been to date.”

Ed Martin, president and CEO of Churchill Falls (Labrador) Corp., which is leading the case, said it’s a disappointing loss.

“We respectfully disagree with the judge’s ruling and more so have a grave concern that he did not address the essence of our argument that the duty of good faith requires renegotiation of the pricing terms of the power contract in the circumstances of this case.”

Martin said if the ruling was allowed to stand, Hydro-Québec would pay less than five per cent of the recent commercial value of Upper Churchill power until the deal ultimately expires in 2041. It’s a disparity that he estimates costs the province between $300 million and $600 million a year, he said.

Quebec has already reaped more than $20 billion from the deal since 1969 compared to about $1 billion for Newfoundland and Labrador, he told a news conference Friday.

Judge Joel Silcoff in his 188-page ruling dated Thursday flatly rejected what he called the “creative legal theories” argued by Churchill Falls (Labrador) Corp., a subsidiary of Newfoundland and Labrador Hydro.

“CFLCo has failed to satisfy the court that, in the context of the nature and equilibrium of the relationship and the legitimate expectations of the parties as reflected in the (1969) power contract, by refusing to renegotiate the pricing terms ... Hydro-Quebec has breached its civil law duty of contractual good faith, co-operation and the reasonable exercise of its rights,” Silcoff wrote.

Moreover, the company’s argument that Hydro-Quebec has somehow violated the true intent of a deal “based on an equitable sharing of risks and benefits” is simply not backed by evidence, Silcoff concludes.

Such a theory “at best requires the court to disregard the clear language and binding force of the power contract as negotiated between the parties by their own free will,” says the judgment.

Hydro-Québec has long argued that the deal is valid because it assumed all the costs and risks associated with the project when the contract was signed.

Newfoundland and Labrador has previously challenged the fairness of those terms all the way up to the Supreme Court of Canada and lost. Its latest attempt relies on its allegations of Hydro-Québec’s “good faith” contractual duties.



By Sue Bailey


Organizations: Hydro-Quebec, Supreme Court of Canada, Newfoundland and Labrador Hydro Judgment.Hydro-Quebec BaileyTHE CANADIAN PRESS

Geographic location: Newfoundland and Labrador, Quebec

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Recent comments

  • Muggins
    July 25, 2014 - 20:32

    Another irresponsible politician kicking this hot potato down the road regardless of the cost. Gotta' keep those law firms who donate to the party happy. They all think the taxpayer pot has no bottom.

  • jimmy
    July 25, 2014 - 17:18

    Why do we keep wasting time and money on this? In 1969 both sides agreed and legally vetted the deal! Nobody in NFLD at the time had the money or the expertise to build such a project. If Quebec didn't get the finance for this then, UC would not even exist today.

  • Nichol
    July 25, 2014 - 15:43

    Of course these people will appeal, and waste more of our money! This decision comes as no surprise. If the shoe was on the other foot....i.e. NL with the price advantage, because of market forces which were unforeseen at the time of contract negotiation, would we be nice and give that up? I think not. Churchill Falls is a chapter in our history, that Governments need to accept, but this crowd seems unable to resist pouring more effort into spending money that we don't have, on a futile effort, for all the wrong reasons. They need to stop believing and doing what Ed Martin tells them. When did we elect him? Everyone should know by now that the market forces that exist today, are dooming the Muskrat Falls project to economic failure, and absolutely draconian, unfair legisislation is dooming the ratepayers of NL to the burden of huge long term debt. Yesterday, the day ahead wholesale price paid for electricity at the Mass. Hub in the NE US was $0.0580/KWh. This is approximately the 'market price' that we are obliged to give MF power to NS in return for building the Maritime Link, and sell them any excess. The cost of producing MF power will have to be be more than double that, although Nalcor has not yet published that figure. This means that any sales at all will have to be highly discounted, the cost of which comes directly out of the pockets of the ratepayers. Anyone who follows the energy market will know that there is a very large surplus of electricity available in Quebec. Ontario and Manitoba have surpluses as well. This is as a result of low Natural Gas prices, which is used to generate electricity, among other sources. These prices will not rise dramatically anytime soon, as the US is estimated to have enough shale gas to last 100 years. Hydro Quebec, which alone, has a capacity to produce some 35,000MW per year compared to Nalcor's tiny 7,400MW (including the 5,400MW produced by CFLCo) was estimated to have a huge surplus of some 30 Terawatt hours this year. This has prompted a rethink of the Romaine project (1550MW, $6.2B) in Quebec, to the point that the Quebec Energy Review Commission was considering recommending cancellation of the last two phases of the project. The projected cost of power from Romaine has been published as $0.0600. No rethink for Nalcor however, which is incredulous. There are many thousands of documents available on Nalcor's website on the MF project. Of course, Mssrs. Bennett and Martin use this as a defense of their project. Sadly, not enough people are able to take all this, and digest it properly. I am one, as is our Government. However, it does not take genius to follow the markets, and see that fully 60% of the project capacity (20% to NS, and the 40% export block) will need to be sold at well below cost, if at all. So, by legislation, this deceitful, reckless Government gave Nalcor assurance of no competition, and simply legislated the ratepayers to pay for this white elephant. We are indeed a 'ship of fools' adrift in a sea of deceit, obfuscation, and much incompetence.