Nalcor’s gamble

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At Hydro Place on Friday, reporters gathered for a news conference with Nalcor head Ed Martin were channelling country singer Kenny Rogers, albeit quietly.

The song? “The Gambler.”

“You’ve got to know when to hold ’em. Know when to fold  ’em. Know when to walk away. Know when to run.”

The news conference was about the failure of the latest attempt to overturn elements of the Upper Churchill contract, and the almost-immediate decision by Martin, wearing his hat as president and CEO of Churchill Falls (Labrador) Corporation  — CF(L)Co — to appeal the decision to the next level of the courts.

“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 in a news release.

“When we made a decision to proceed with this case before the Quebec Superior Court in 2010, we anticipated that either party would appeal the judgment to the higher courts given the significance of this case. We have instructed our legal team to commence preparation for an appeal following a comprehensive review of the decision received yesterday.”

So far, the company has spent around $4 million in legal costs on the court challenge.

The decision CF(L)Co wants to appeal makes the company responsible for $1.4 million of Hydro-Québec’s costs.

Should it be appealed? There are some interesting issues, one being that a block of CF(L)Co’s expert evidence in the case, a report by historian David Massell, was deemed not relevant to the proceedings by Quebec Superior Court Judge Joel Silcoff, who heard the case.

The judge also questioned the objective of another of CF(L)Co’s witnesses, electrical expert John Dalton, deciding “the court cannot look to the Dalton Report for assistance in determining either the justification for or the financial impact of the relief sought by CF(L)Co in these proceedings.”

The judge even questioned Dalton’s “objectivity and comprehension of material facts.”

He took a much kinder view of Hydro-Québec’s expert consultants. The judge quoted extensively from a report by Hydro-Québec witness Carlos Lapuerta, also saying “Lapuerta’s experience and qualifications in the industry, both technical and applied, regarding the questions in issue in these proceedings are most impressive. His critique of the views and opinions of opposing experts is measured and objective. His analysis is both coherent and persuasive. … His analysis and conclusions will be retained (by the court) as being both credible and persuasive.”

To be blunt, it was clear which way the case was going. By the time you reach the judge’s conclusion that “there is no credible evidence that Hydro-Québec, by refusing to renegotiate the pricing terms of the power contract, acted otherwise than in respect of and in full compliance with its contractual obligations of good faith and co-operation and those of exercising its rights in a reasonable manner,” the writing was well on the wall.

Be that as it may, that part of the case is done.

Appeals of court cases deal not with evidence, but with errors in law.

Nalcor may not like it, but throwing the judicial dice with larger odds at stake doesn’t always work.

Organizations: Hydro-Québec, Quebec Superior Court

Geographic location: Quebec

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Recent comments

  • A fair Risk?
    July 28, 2014 - 12:03

    How can one sue over a matter of good faith? You have the other party's respect or you don't. The discussion decayed from "risk vs benefit" to "catastrophic loss vs massive windfall". HQC has limited liability on any project, else they could take the entire project down on a bad investment. There is no limit on liability, and apparently no obligation to share the lucrative profit. Further, not even an offer to use the windfall to provide equity investment for the lower Churchill. If the project were in QC, maybe - after all greed is a human trait, but the "house" that Joey built was on Joey's land! Nalcor leans on the Atlantic Accord benefits plenty so.... why not ask the two Brians if unelected courts are the place to find justice between elected governments?

  • Henry Jefford
    July 27, 2014 - 20:44

    This one sided contract with Quebec is suppose to be over in the year 2041 ? If NFLD does not have its own power transmission lines to carry the Upper Churchill falls power when this contract ends ! Then Quebec not NFLD will still have all the say over the MIGHTY CHURCHILL FALLS POWER

  • Nichol
    July 26, 2014 - 09:10

    Since you didn't allow any comments on this story, (including mine), and CBC did, I thought I would pass along my similarly themed comments made yesterday under my other pseudonym, bewarefog. Your story doesn't quite reach the same conclusion however.... bewarefog Sadly, this is just another of several defeats NL has suffered over CF. The new legal argument in this case was based on the principle of 'fairness'. Ed Martin says we are prepared to appeal this all the way to the Supreme Court of Canada. One of the previous cases on Churchill Falls, based on very "eminent" legal advice as well, was appealed to the SCC. NL lost that one too. Mr. Martin may think he holds 'em, but he sure doesn't know when to fold 'em. I would like to know when we elected Martin? The average weighted price paid yesterday for electricity at the Mass. Hub was $0.0580/KWh. What is your forecasted cost to produce MF power Ed? You haven't told us yet. Romaine River (1550MW, $6.2B) forecasted power cost was published at $.0600/KWh. Muskrat Falls cost/KWh has to be at least double that with only 824MW. Our Government simply passed very unfair, draconian laws, assuring Nalcor of no competition and legislating the ratepayers of NL to pay all the costs of MF. We, the ratepayers of NL, are indeed aboard a 'ship of fools', afloat in a sea of deceit, arrogance, obfuscation and incompetence.