Go big or stay at home

Randy Simms
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There are times when we must stand and fight, even in the face of a dire consequence. History abounds with examples of underdogs prevailing against those who would keep them down.

The court battle in Quebec over the Upper Churchill power contract is like that.

Back when the original deal was signed to develop the Upper Churchill River, Newfoundland was very much the underdog and Hydro-Québec was in charge of outcomes. The millions of dollars lost to us as a result of that one bad deal can never be recovered. But should we simply give up the fight and forget it, or should we fight to the last day to try and right an obvious wrong?

Last week, a Quebec judge ruled against our province on the Upper Churchill contract. Arguments detailing how one-sided the contract is and the need for balance were rejected by the court.

Judge Joel Silcoff used a narrow interpretation of the law to rule against us and completely rejected our lawyers’ arguments for fairness. The case was made possible only after Quebec made changes to its civil code which requires that all contracts have to be fair to all parties.

That sounds good, but defining what is fair is not as easy.

Silcoff determined that the Upper Churchill contract was fair because Hydro-Québec took all of the risk with the power development, and that risk was justification for the disproportionate benefits flowing to the main investor. In other words, he ignored the rights of the owners of the resource completely.

His final assessment was blunt: “CFLCo and Hydro-Québec got what they bargained for.”

Now comes the big question: is it time to give up the battle? After all, we’ve spent over $4 million on the court challenge, to no avail. Adding insult to injury, we also have to pay the court costs for Hydro-Québec.

Some would suggest we learn from this failed effort and leave well enough alone. The argument goes that the Upper Churchill contract wasn’t considered a bad deal when it was signed, but world events and the price of energy significantly affected the intended outcomes; no one was supposed to come out of the deal a loser. The fact that Newfoundland and Labrador found itself on the wrong end of the deal is simply bad luck and we should move on.

There is only one part of that argument I accept: that no one was supposed to come out of the Upper Churchill deal a loser. Newfoundland and Labrador and Hydro-Québec were both supposed to be winners, and that’s where fairness comes into play. Unintended consequences led to this disproportionate advantage for Quebec and there should have been redress years ago. But the federal government trembles when it comes to all things Quebec so our natural ally let us down.

Nalcor president Ed Martin made it perfectly clear after the ruling came down that they intend to pursue this further. He predicts it could end up before the Supreme Court of Canada.

Martin said they knew going in that an appeal would be launched, no matter who won or lost.

Muskrat Falls may be a continuing source of dissension, but there’s no disagreeing with his position on this. The costs of battling the Upper Churchill contract, through every court in the land if need be, are justifiable.

There are times we must stand and fight in the face of overwhelming odds, and this may be such a time. Political leaders and their cohorts have to judiciously pick their battles, and win more than they lose — I get that.

But sometimes there comes a fight which must be waged in the name of natural justice, even if the forces aligned against you are massive. This seems to be just such a fight.

Count me in.

 

Randy Simms is a political commentator and broadcaster. He can be reached at

rsimms@nf.sympatico.ca

Twitter: @RandyRsimms.

 

 

Organizations: Hydro-Québec, Supreme Court of Canada

Geographic location: Quebec, Newfoundland and Labrador, Upper Churchill River

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  • Dolf
    August 04, 2014 - 13:09

    Five million dollars down the drain on this appear, another five to ten million appealing the appeals. The treasury of Newfoundland & Labrador is nothing but Monopoly money to Ed Martin's Nalcor. Dwight Ball and his Liberals can't wait to get THEIR slippery paws on that war chest and waste it the same way.

  • Nichol
    August 02, 2014 - 17:42

    Randy, I see the court challenge differently than you, after reading Silcoff's decision. The next step is an appeal to the Appeal Court of Quebec. Then the SCC. The concept of 'fairness' that you describe is the issue of the contract being fair to both parties at the time, not whether it is 'fair' after forces completely external to both parties to the contract have brought about changes in a marketplace, which neither party held any influence over. The energy market was changed forever by OPEC in the early seventies, and was unforeseen by everyone. This is why the Judge called the Nalcor position 'creative' among other things. I am not a lawyer, and my reading of Silcoff may be out to lunch, but I think that is the essence. Courts are loath to change contracts, and appeal courts only look at whether the lower court erred in law. I believe further appeals on the upper Churchill are a waste of our money...period. The thing that really does concern me is the fact that we are currently charging down a very similar road as the Upper Churchill, except it is a reversal of what happened then. We are well aware of the changes that took place in the energy market as early as 2008, when Muskrat Falls was still in the planning stages. The shale gas 'revolution' massively increased the production of natural gas, which in turn, dramatically lowered prices. The US now has enough proven NG reserves to last over 100 years. This low priced gas in turn lowered the price of electricity generated by NG, which is prominent in the NE US. Wholesale electricity prices dropped by nearly 50% over a five year period, and energy companies began turning to NG plants to replace old coal and oil burners. Nalcor seemed not to take any notice of this dramatic market shift, and continued down the purely politically motivated 'build around Quebec at any cost' path. With the size of Muskrat Falls a relatively small 824MW, it is a very isolated, high cost project. Today, Quebec has a huge surplus of electricity, and the Government mandated Commission which examined energy in that Province recently, recommended cancellation of the last two phases of the 1550MW, $ 6.5B Romaine project. Power from Romaine was forecasted to cost $0.0600KWh to produce. With all the oversight, we don't yet know what MF power will cost. A simple comparison will tell you that MF power will cost well over double that to produce. Roger Lanoue, co-chair of the same Commission stated that the average price that Hydro Quebec was able to sell it's export power for, was $0.0300KWh. Ontario and Manitoba also have surplus electricity. Nalcor is entering a marketplace, already plagued with over supply and low prices. The spot price paid for electricity in New England for August 1, 2014 was $0.0359/KWh (source: EIA). They seem to take no notice at all, and continue to give us construction, engineering and cost updates, with no reference to the almost certain economic disaster this project will be for the NL ratepayers, who have been legislated to pay for it all. Muskrat Falls was sold to us as 20% of capacity to NS in return for the link, 40% to replace Holyrood, and the remaining 40% for export. With no revenue from the NS block for many years, and export sales, if there are any, having to be made at huge discounts, which come directly out of the pockets of ratepayers, things are very bleak indeed. No industrial enterprise can possibly ignore 40% of it's production (the export block). What we have done, in essence, is spend $ 9 or 10 Billion on the replacement of Holyrood, and a connection to NS. These terrible market conditions were known for several years prior to sanction, the complete reverse of the Churchill Falls situation. Unfortunately, there is no appeal court for our own stupidity.

  • Cyril Rogers
    August 02, 2014 - 09:19

    I often share the sense of outrage and frustration that most do over the grossly lop-sided deal that gave Quebec all of the benefits from the Upper Churchill. However, to continue to trumpet that call when it is painfully obvious that the deal cannot be reversed…... or mitigated in favour of NL…... is simply to obfuscate and take away from the realities of an even greater folly….Muskrat Falls. The politicians are all colluding on this one….. and their pious pronouncements of continuing the Upper Churchill challenge as a matter of principle…. is pure and simple hypocrisy! We need someone to guard us against the foxes in our own house, so to speak…….because what the current political establishment espouses is nothing short of a money grab by the new robber barons of the province…..the politicians and their well-heeled friends who will benefit immensely….. at the expense of the people and the treasury of the province. The level of incompetence is exceeded only by the empty rhetoric and obfuscation that comes out of their mouths almost daily. Sadly…. for the people of the province, we are a captive audience as the fiscal capacity of the province goes over a cliff…..MADE….RIGHT….HERE.