The government of Newfoundland and Labrador said today it will appeal a Quebec Superior Court ruling that strikes down its bid to renegotiate a 1969 deal it says drastically under-prices power from the Churchill Falls hydro plant.
The case was launched in February 2010 after Hydro-Québec rebuffed a call from the Newfoundland and Labrador government to reopen the contentious agreement.
Its terms have been a source of friction between the two provinces for decades.
Premier Tom Marshall of Newfoundland and Labrador said legal advisers support continuing a fight that has so far cost taxpayers about $4 million.
The province’s latest argument that Quebec has a “good faith” duty to recognize how unforeseen pricing escalations have created what it calls grossly unfair terms could reach the Supreme Court of Canada, he said.
“I think any government and any premier would be negligent if they didn’t pursue to right this wrong on behalf of the people of the province when there’s an opportunity to do so,” he said in an interview.
“If we’re successful, the revenue gains will be tenfold what the costs have been to date.”
Ed Martin, president and CEO of Churchill Falls (Labrador) Corp., which is leading the case, said it’s a disappointing loss.
“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 if the ruling was allowed to stand, Hydro-Québec would pay less than five per cent of the recent commercial value of Upper Churchill power until the deal ultimately expires in 2041. It’s a disparity that he estimates costs the province between $300 million and $600 million a year, he said.
Quebec has already reaped more than $20 billion from the deal since 1969 compared to about $1 billion for Newfoundland and Labrador, he told a news conference Friday.
Judge Joel Silcoff in his 188-page ruling dated Thursday flatly rejected what he called the “creative legal theories” argued by Churchill Falls (Labrador) Corp., a subsidiary of Newfoundland and Labrador Hydro.
“CFLCo has failed to satisfy the court that, in the context of the nature and equilibrium of the relationship and the legitimate expectations of the parties as reflected in the (1969) power contract, by refusing to renegotiate the pricing terms ... Hydro-Quebec has breached its civil law duty of contractual good faith, co-operation and the reasonable exercise of its rights,” Silcoff wrote.
Moreover, the company’s argument that Hydro-Quebec has somehow violated the true intent of a deal “based on an equitable sharing of risks and benefits” is simply not backed by evidence, Silcoff concludes.
Such a theory “at best requires the court to disregard the clear language and binding force of the power contract as negotiated between the parties by their own free will,” says the judgment.
Hydro-Québec has long argued that the deal is valid because it assumed all the costs and risks associated with the project when the contract was signed.
Newfoundland and Labrador has previously challenged the fairness of those terms all the way up to the Supreme Court of Canada and lost. Its latest attempt relies on its allegations of Hydro-Québec’s “good faith” contractual duties.
By Sue Bailey
THE CANADIAN PRESS—ST. JOHN’S