Power enough for everyone — even Quebec

Peter Jackson
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In papers submitted to media, the anti-Muskrat Falls company 2041 Group warns that a key question about water rights on the Churchill River has been left dangling.

The group — which consists of five St. John’s lawyers — warns Hydro-Québec could torpedo any agreement to share water and/or electricity between the Churchill Falls (Labrador) Corporation (CF(L)Co) and Newfoundland’s energy company Nalcor, on the basis that such an arrangement violates water rights entrenched in its contract with CF(L)Co.

“The outcome of any such legal proceedings is far from certain,” says 2041 Group. Indeed, legal outcomes are rarely certain. What’s more certain is whether a legal loophole is as big as a Mack Truck or as small as a spider hole.

2041 Group takes a number of angles with its warning, but the central question is this: would a water management agreement (WMA) threaten CF(L)Co’s ability to provide Quebec’s contractual supply at any given time of the year?

If not, I contend 2041 Group is engaging in the sort of monster-under-the-bed fear-mongering for which Premier Kathy Dunderdale and her predecessor have been repeatedly condemned.

I spoke with Nalcor’s Gil Bennett last week about the WMA. Not surprisingly, he said the 2041 Group got a number of things wrong.

First, he said a clause in Hydro-Québec’s power contract entitles it to extra capacity if available. The 2041 Group has suggested that could allow Quebec to demand power designated for Muskrat Falls under the WMA.

“(They’re) wrong on that point,” said Bennett. “It’s the difference between capacity — what the plant is capable of producing — and the energy requirements of Hydro-Québec.” HQ can vary the amount of production it requires on a day-to-day or hour-to-hour basis, he said, and can get more than what’s known as its “firm” capacity outlined in the contract.

“But they’re never entitled to more energy than their monthly allocation.” Bennett says they’ve done extensive modelling, and there’s no scenario in which the WMA wouldn’t work.

“There is no situation where either CF(L)Co or Nalcor would … interfere with the operation of the (Hydro-Québec) power contract.”

Over the past couple of weeks, the water rights issue seems to have lost some traction. My own foray ended on an interesting note this week.

When I emailed questions to Nalcor earlier this month, the result was a one-on-one phone interview with Gil Bennett. When I emailed a question to the 2041 Group’s Dennis Browne, the response was to send me their position paper, which I was already aware of.

On Tuesday, Browne — a former consumer advocate — emailed to say he was out of town last week and had only just read my previous column, in which I expressed skepticism over the 2041 argument.

Browne’s response? Contact Hydro-Québec.

“Why doesn’t Nalcor contact Hydro-Québec to ascertain their position?” he added.

“Why don’t you contact them?” I replied. Bennett had told me 2041 had not brought its concerns to Nalcor before going public, and I was curious to see whether they had approached Hydro-Québec.

“Do your own homework, Peter. You are the journalist,” Browne replied. It’s the kind of response I’d expect from an embattled politician, not a former consumer advocate. I should think Browne knows that Hydro-Québec has refused to comment on this matter in the past. CBC Radio’s Halifax morning show sought input, and was told the company does not comment on what it considers to be another province’s internal matters.

Nonetheless, I have forwarded an 11th-hour query to Hydro-Québec. I’ll let you know if I get a response, but I’m not holding my breath.


Peter Jackson is The Telegram’s

commentary editor. Email pjackson@thetelegram.com.

Twitter @pjackson_NL


UPDATE: Hydro-Québec's response: "We will not be commenting on this topic."


Organizations: Hydro-Québec, CBC Radio

Geographic location: Quebec, Muskrat Falls, Churchill River Newfoundland

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Recent comments

  • Steven
    November 24, 2012 - 21:36

    I am from Quebec and I follow this situation. I heard a former politician from the 60's and he said that none of the banks in Toronto, New-York, Montreal wanted to invest in Hydro Electricity only the Qc govt of that time wanted to back up NL and now we know the result with this never ending contract. Do you think that this is true. I think that Quebec should reopen the contract and work with Nalcor to develop Muskrat Falls and give all the powers and profits to NL. Quebec will benefit anyways because the engineer firm Lavalin is already working on the project and all the goods and some of the workers will come from Quebec, Ontario because it does not make sense to sent all the construction materials from Quebec Ontario to NS, NL and then Labrador, the shortest way is through the city Sept-Iles, Qc. Hydro Quebec should charge a fair amount to carry the power into their power lines to NY, VT, ON. The undersea cable is clearly too expansive and will give a big power price hike to people in NL.

  • Cyril Rogers
    November 22, 2012 - 10:54

    The glib assurances by Gilbert Bennett and NALCOR about water rights does NOT mean they are correct nor does it mean that the 2041 group is right either. However, fiscal and legal prudence means covering all the bases and it is not reassuring to know that NALCOR is merely "presuming" there will be no legal challenge from HQ, or that HQ would lose if they did indeed challenge the CF(L) Co contract in court. A referral to the courts would be most appropriate but the problem for NLACOR is their unseemly haste to move forward with this project. Of course, the government's secretive issuance of monies to continue with a road, PRIOR to sanction, is the exact opposite of what they said they would do. Why the secrecy? No wonder Jerome Kennedy was squirming when he spoke with reporters. It just demonstrates yet again that the government's word means nothing. Likewise, NALCOR officials simply pin their hopes on legal opinions as opposed to backing it up with court references. In both instances, they are afraid to open it up to full scrutiny because their whole premise is fatally flawed.

  • Winston Adams
    November 22, 2012 - 10:50

    David, I agree, it's a high risk that there will little or no sales at all. We're going in a hundred direction: legal issues; study gas; study wind; Emera in; Emera out; 1/50 or 1/150 reliability etc----- and what is still very uncertain is our island demand for this power, that was suppose to be the anchor for the logic for this project. The demand , as forecast averages 15 to 20 MW growth per year. This is readily offset by 40 MW reduction per year with efficient heating. If this was not economic or unreliable , then the forecast would have more to stand on. But Nalcor has been consistantly silence on this issue. The risk that this forecast demand will not hold up is substancial. If there is little certainity around that, all those other issues are largely meaningless, are they not? They are all red herrings, keeping lots of critics busy while giving Nalcor a pass on the proof of the demand issue. Is not the demand on the island that will make or break this project? Plus 1.4 percent per year can and may be minus1 percent per year, whereby this is a failure.

  • david
    November 22, 2012 - 09:52

    "....Bennett says they’ve done extensive modelling, and there’s no scenario in which the WMA wouldn’t work......" Has anyone bothered to model the case where very little of the power generated at Muskrat Falls was needed or purchased by anyone at all? Does anyone care to even ask that question, or is everyone's head so far up their butts in love with this thing that it is simply a unquestioned-but-unconfirmed 'fact'?

  • Cold Future
    November 22, 2012 - 09:19

    Quebec's rights of the 1969 contract have been fully tested and confirmed in the courts. Muskrat development and operation must conform to that contract.It also must be taken into account in assessing the economic viabily of the project which is severely impacted by the additional costs imposed by going around Quebec as opposed to through Quebec and the extra cost to develop capacity to provide power to Nova Scotia in exchange for the Gulf subsea cable. These impacts essentially double the cost of the project. That extra cost must be borne by the ratepayers. It is that decision to escalate the electricity rates and its impacts on the domestic consumer which should weigh very heavilly upon the legislature before this project gets to the point where the project benefits cannot be justified against the hardship imposed.

  • Maurice E. Adams
    November 22, 2012 - 08:57

    The onus is on Nalcor to "demonstrate" -- publicly--- along with its supporting evidence, analysis, modeling, hydrology, etc. that its internal water management agreement ensures that Muskrat Falls will provide the firm energy that is forecast and that it will do so WITHOUT adversely affecting Hydro Quebec's legal/contractual/priority rights --- rights that have in the past and will in the future be determined, not by NL, but by Quebec courts.

  • John Samms
    November 22, 2012 - 08:34

    Mr. Coffey - Could you please explain to me how the WMA or Lower Churchill developments "adversely" affect HQ's contractual rights? Mr. Cabana - You really need to read the 1961 CF(L) Co lease act again, you're clearly confused. Nice job Peter.

    • Brad Cabana
      November 22, 2012 - 09:31

      Clearly, the Justice considered my points raised as posing "serious questions of law".Part of my argument incorporates the points made above. I will take her word over a first year law student 10 out of 10 times. The language is quite clear, so perhaps you should confine yourself to it as opposed to carrying on with your agenda of trying to be right in your premature arguments made as of late.

  • John Smith
    November 22, 2012 - 08:25

    Well...we have heard from the three amigos...Brad Bern and Maurice...LOL The bottom line here is that Nalcor knows what the total amount of power per month that QH is entitled to...period. No more. So knowing that we can look at the past, and understand how to manage the water to give QH what they are legally entitiled to, and ensure that there is plenty of water for not only little musrat...but the much larger Gull Island. I also find it interesting that one of the lead lawyers for the government, who investigated water rights, is a member of Mr. Coffey's law office...interesting indeed...

    • david
      November 22, 2012 - 16:30

      Some people have amigos....others are solitary partisan idiot rubes, John Smith.

    • John Smith
      November 23, 2012 - 09:51

      Wow David...good attack there...are you in grade 7? LOL I can assure you my friend I am not alone...both recent polls by CRA and by NTV have the majority polled in favor of Muskrat falls...by a large margin. Oh...let me guess...these polls are corrupt...blah blah blah...LOL yes I know... Perhaps instead of calling me names, like a little child....you could put forward critical analysis that proves why all the experts are wrong. Don't just tell me that Nalcor are corrupt, and are providing false information...show me experts, show me reviews, show me reports, show me hard data that proves that we will not need additional power in the next 50 years...and that muskrat is not 2.4 BILLION dollars cheaper than any alternative....show me David....

    • david
      November 23, 2012 - 10:16

      Partisan. Idiot. Rube.

    • John Smith
      November 23, 2012 - 14:36

      ahhh...just as I thought...

  • Brad Cabana
    November 22, 2012 - 07:20

    Mr Brown is right, and you should do far more research than you are doing. If you did, you would realize the 1961 lease agreement signed with CFLCO gives Hydro Quebec/CFLCO "EXCLUSIVE" right to " ALL" the water in th Upper Churchill. You would also discover that the Public Utilities Act does not apply to the lease. The PUB is a creature of the Public Utilities Act, and therefore it seems it would have NO jurisdiction to alter the monopoly granted by the lease. The Power Contract is built on that foundation. The 1999 Shareholder's Agreement entrenchs that right, and grants Hydro Quebec a veto, which is why CFLCO did not enter into a direct water management agreement with Nalcor, and which is why Nalcor then tried to circumvent the situation by going to the PUB to force an agreement. In other words, its Danny Williams old strategy of doing what he wants to get his own way. Thats fine until it meets reality, as in Abitibi, etc. You need to examine the COMPLETE set of facts before you impart a wrong notion on the people of the province. It does us no favours to follow the dam the torpedos logic of the current and former premier when the end result is a devastating financial debacle.

    • Peter Jackson
      November 22, 2012 - 17:58

      So Brad Cabana is worried about someone "imparting a wrong notion on the people of the province." I'd just like to say that I've actually acknowledged almost EVERYTHING you said, iin this or the previous column. The only point I contend is the notion that Danny and Nalcor did some sort of end run to force the agreement. The reference to the PUB was normal procedure as spelled out in the EPCA and received input from all parties (notwithstanding attempts by aboriginal groups to get intervenor status). The agreement does NOT override Quebec's water rights. I did not even suggest that. Perhaps you should re-read it again, with unbiased eyes this time.

    • John Smith
      November 23, 2012 - 17:41

      Peter...you give creedence to Cabana by acknowledging him...that's the worst thing you could do to that guy...like feeding a stray cat...you will never be rid of it...

  • Bern Coffey
    November 22, 2012 - 07:14

    Peter: Your column begins: "In papers submitted to media, the anti-Muskrat Falls company 2041 Group warns that a key question about water rights on the Churchill River has been left dangling." In the interest of giving The Telegram's readers ready access to at least one of those papers, I reproduce it below. I do so because your column did not mention the focus of this paper, namely that Hydro Quebec's contractual right to receive all its power [and energy] from the Churchill Falls Plant would apparently be adversely affected by Nalcor production for CF(L)Co under the WMA. The paper is titled: "Muskrat Falls, Water Rights, Hydro-Quebec and Legal Certainty." The 1969 Hydro-Quebec Power Contract, the 2016-2041 Renewal Contract, and the Guaranteed Winter Availability Contract (expires 2041) are all agreements for the supply of power by CF(L)Co to Hydro-Quebec from the Churchill Falls Plant using water in the Churchill Falls reservoir. The CF(L)Co-Nalcor water management agreement (the “WMA”) purports to alter Hydro-Quebec's contractual rights by allowing the scheduling of Nalcor production for CF(L)Co. In this context, ‘Nalcor production for CF(L)Co’ means Nalcor generating electricity at Muskrat Falls (or Gull Island) for delivery to Hydro-Quebec in Quebec. While Nalcor maintains the source of the electrons CF(L)Co delivers to Hydro-Quebec doesn’t matter, no one knows whether the courts would support Nalcor’s position. What is known is that in 1984 the Supreme Court of Canada overturned a decision of the Newfoundland Court of Appeal, and in doing so said: "It was argued by the Attorney General of Newfoundland that control over the power generated at Churchill Falls is essential for the effective management by Newfoundland of its water resources and to meet the energy needs of the Province. However, it is not for this Court to consider the desirability of legislation from a social or economic perspective where a constitutional issue is raised. As Laskin C.J. said in Central Canada Potash Co. v. Government of Saskatchewan [citation omitted]: ‘Where governments in good faith, as in this case, invoke authority to realize desirable economic policies, they must know that they have no open-ended means of achieving their goals when there are constitutional limitations on the legislative power under which they purport to act. They are entitled to expect that the Courts, and especially this Court, will approach the task of appraisal of the constitutionality of social and economic programmes with sympathy and regard for the serious consequences of holding them ultra vires. Yet, if the appraisal results in a clash with the Constitution, it is the latter which must govern. That is the situation here.’" Section 5.7 of the EPCA, 1994 and sections 3.1 and 3.2 of the WMA expressly prohibit any provision in Hydro-Quebec’s Prior Power Contracts from being adversely affected by the WMA. If the courts were to decide Hydro-Quebec has a right to receive its power from the CF Plant, there could be no ‘Nalcor production for CF(L)Co’ delivered to Hydro-Quebec. Under the WMA regime, without ‘Nalcor production for CF(L)Co’ there can be no 'CF(L)Co production for Nalcor.' And without 'Nalcor production for CF(L)Co' and 'CF(L)Co production for Nalcor,' the WMA can't be implemented. Where will things stand if Hydro-Quebec takes the matter to court and the result is that Nalcor cannot implement a working WMA? Nalcor’s Pre-Filed Evidence in the 2009 Water Management Agreement Application to the PUB provides the answer. In outlining the major problems associated with producing power and energy on the lower Churchill River without a working WMA, Nalcor said: “In many months, the lower Churchill facilities [Muskrat Falls and Gull Island] would have insufficient water for production requirements during periods of reduced production [upstream] at Churchill Falls.” [Pre-Filed Evidence: page 13, lines 16-18] Based on the data and scenarios in Nalcor’s own Pre-Filed Evidence, without a working WMA Nalcor would be limited to approximately 175 MW of continuous delivery in a long-term power purchase agreement for Muskrat Falls. This is not to say Nalcor could not advance legal argument(s) to support its position should Hydro-Quebec challenge implementation of the WMA. The point is simply that the outcome of any such legal proceedings is far from certain. Billions of dollars are at stake. Legal certainty is required, particularly in light of Hydro-Quebec’s past success in defending its power contract rights. Nalcor should now either reach an agreement with Hydro-Quebec or have the Courts definitively determine the matter. Otherwise, Hydro-Quebec may in future institute legal proceedings, the outcome of which could be disastrous for Newfoundland and Labrador. Bern Coffey

    • david
      November 23, 2012 - 10:17

      Coudn't find a publisher?

  • Maurice E. Adams
    November 22, 2012 - 07:08

    Little more than an "he said, she said" article Peter. What a disappointment. Why would ask Dennis Browne to contact HQ, when you already know that HQ won't comment on internal provincial matters? You are grasping are straws Peter. Whatever Bennett says, you accept. Why not demand and then analyze the "extensive modelling" that Nalcor says it has done, instead of accepting Nalcor's gobbledegook?.... But that would require some independent thought. wouldn't it Peter? ..... The very fact that HQ considers the WMA to be an "internal provincial matter", shows that HQ's position is that its 1969 contracts, in law, take priority and that it will rely on, and use that law, in their courts, but only if and when required --- pretty much what Group 2041 says needs legal clarity,

    • What a load
      November 22, 2012 - 07:54

      There must be a sale on straws because there are a lot you grasping at them.