If anyone still harboured doubts about the wily business acumen of Hydro-Quebec, this would be the week to cast them off once and for all.
The Quebec utility made a stunning move Monday, clearly designed to cast doubts on the viability of the Muskrat Falls project while shoring up its water rights regarding the Upper Churchill River.
In an application filed in Quebec Superior Court, Hydro-Quebec has requested a declaratory statement confirming its rights with respect to Upper Churchill power generation. Specifically, it focuses on its core right under the original 1969 contract to purchase any additional power deemed available by the operators, the Churchill Falls (Labrador) Company (CFLCo).
It’s certainly a vindication of sorts for the famous five St. John’s lawyers, 2041 Group. They warned months ago that a water management agreement (WMA) between CFLCo and this province’s Crown agency, Nalcor, raised serious legal questions.
Nalcor’s Gil Bennett has insisted the WMA is sound, and does not threaten Hydro-Quebec’s contracted supply of power. But the wording of the 1969 contract, along with subsequent bilateral agreements, is open to interpretation.
One of the key 1969 clauses is 6.4, which states that, on top of the monthly allotments of power spelled out elsewhere in the contract, “whenever additional power can, in the opinion of CFLCo, be made available, such capacity will also be made available to Hydro-Quebec on request.”
At the very least, Nalcor should be double-checking its legal standing. It may even be prudent to put a hold on things until the legal landscape becomes a little more clear.
What’s so infuriating about all this, of course, is that Hydro-Quebec officials have remained characteristically mute about Muskrat Falls from Day 1. There is no way to deal with them, to smooth out concerns or reach mutually acceptable terms.
When the WMA was first proposed, Quebec members of CFLCo used a veto to reject a bilateral agreement, which forced the matter before Newfoundland’s Public Utilities Board (PUB). No reasons or explanations were given.
But Hydro-Quebec did submit a letter to the PUB in 2009, during hearings on the WMA:
“We note that the Nalcor Application, as well as the Nalcor and CF(L)Co submissions of December 10, 2009, acknowledge that the CF(L)Co/Hydro-Quebec Power Contracts are protected by Section 5.7 of the (Electrical Power Control Act), as does the water management agreement proposed by both Suppliers to the Board.
“In such circumstances, Hydro-Quebec has decided not to intervene in the Nalcor Application.”
Its question before the courts now, therefore, seems highly duplicitous, if not vexatious.
It’s worth noting that Nalcor also has court cases working their way through Quebec courts regarding hydroelectricity. It has challenged rulings by the Quebec regulator with respect to gaining access to power corridors through Quebec. And it’s challenging the 1969 Upper Churchill contract under a “good faith” clause in Quebec civil law.
It would be naïve to think there’s not a bit of tit for tat in the most recent filing.
It’s true there is some ambiguity in the contractual language. In many ways, it boils down to one question: would the co-operative approach to power generation between the two plants constitute “operational flexibility,” as cited in the contract, and would that mean Hydro-Quebec can claim additional power is being generated?
Law student John Samms blogged extensively about the WMA when the controversy arose last winter.
“It's not surprising that (Hydro-Quebec) would try and get their contractual rights generously defined,” he told me Monday. “It seems to me they’re trying to give ‘operational flexibility’ an extremely broad meaning,” Samms said. “In the end it comes down to whether the WMA breaches the power contract. I haven't seen any evidence to suggest it does.”
Peter Jackson is The Telegram’s commentary editor. He can be contacted