In 1969, a power contract was signed between the Churchill Falls (Labrador) Corporation Limited (CFLCo) and Hydro -governing profits from the Churchill Falls hydroelectric development on the Upper Churchill River.
Over the years, the value of the power has grown and, according to repeated arguments made by CFLCo and the government of Newfoundland and Labrador, the result has been an unfair financial return to Hydro-Québec and the Quebec government as opposed to Newfoundland and Labrador. Perhaps the most aggressive attempt to alter the status quo was in 1981, when the provincial government passed the Upper Churchill Water Rights Reversion Act, trying to take control of the Churchill Falls assets and, ultimately, get more money from Churchill Falls for Newfoundland and Labrador. In 1984, the Supreme Court of Canada shut down the province’s move and found its actions to be unconstitutional. The back-and-forth over Churchill Falls power was perhaps best summed up in a Department of Natural Resources publication in fall 2012: “The province has engaged in extensive litigation over the years in relation to the Upper Churchill; none has been successful.”
The so-called “good faith” legal argument begins, as the president of CFLCo sends a letter to the president of Hydro-Québec asking for a renegotiation of the pricing in the Upper Churchill power contract in the name of fairness. The argument is based on a requirement in Quebec civil law that parties to a contract act in good faith — and not “abuse their contractual rights” — through the life of a contract. In a news release issued Nov. 30, Nalcor Energy notes keeping the contracted power purchase prices would mean power being sold to Hydro-Québec for less than five per cent of its commercial value for another 32 years.
The status quo, the Crown corporation states, creates a disparity between the benefits for Quebec versus the benefits for Newfoundland and Labrador.
Two months later and, with no reply from Hydro-Québec, the president of CFLCo, Ed Martin (also president and CEO of Nalcor Energy), announces CFLCo will be taking its argument for more money from Upper Churchill power to the courts. “We believe the situation with the Upper Churchill Power Contract, as long as it is outstanding, to be unjust and to refuse to renegotiate the pricing terms is inconsistent with the obligation imposed by the law of Quebec to act in good faith in all legal relationships,” Martin says, promising to file a motion in Quebec Superior Court “in the coming weeks.”
The legal action is filed in Quebec courts by CFLCo. It must be filed in Quebec as the original contract is governed by the laws of Quebec.
The matter proceeds to trial. Sessions for the presentation of arguments are scheduled to continue through to the end of the year. A decision is expected by the end of 2014. According to Nalcor Energy, “appeals can be expected, regardless of the result, including possibly an appeal to the Supreme Court of Canada. This would likely take at least five years before the issue could be finally determined.”
The Telegram has been following this story for 3 years and 10 months
What we want to know:
Does the “good faith” argument have any merit?
Who has the answer:
The judges of the Quebec Superior Court (to begin with).