With Upper Churchill, faint hope is still hope

Peter Jackson pjackson@thetelegram.com
Published on July 30, 2014

The hallmark of insanity, so the saying goes, is the act of repeatedly trying something over and over again and expecting a different result.

That is how many characterize attempts by this province to undo the 1969 Upper Churchill power

contract between Churchill Falls (Labrador) Co. (CFLCo) and Hydro-Québec.

Last week, a judge in Quebec rejected an application by this province’s energy corporation, Nalcor, to change the pricing scheme in that contract.

With no escalator clause, CFLCo — and, by extension, this province — has lost out on a huge windfall reaped by Hydro-Québec when electricity prices rose sharply in the 1970s.

Courts don’t like monkeying with contracts. It sets a bad precedent and sows distrust within the business community. Barring any clear irregularities, the contract reigns.

And that, in a nutshell, has been the essence of two major court rulings handed down on the Upper Churchill contract — the decision last Thursday, and a Canadian Supreme Court ruling in 1984 that quashed provincial legislation aimed at reverting water rights on the Churchill River back to the province.

In its current challenge, Nalcor referred to Quebec’s civil code which declares contracts must not only be negotiated in good faith, but must pan out to be equitable and representative of the understood “relationship” between the parties.

It’s a nebulous concept, and difficult to demonstrate one way or the other.

In the end, Justice Joel Silcoff decided there was no direct evidence of an imbalance in contract negotiations and outcomes.

That may be true, but his interpretation of the circumstances at that time do leave room for argument.

For example, Silcoff says the fixed rate of return for CFLCo was seen as a benefit because it allowed the company to avail of loans it may otherwise have not secured.

That’s one way of seeing it. Another way is to consider that CFLCo had little choice but to accept the fixed price if it wanted to fund the project at all.

Silcoff also noted it was CFLCo that demanded an even lower sale price for a 25-year extension of the contract (from 2016-2041). If true, this would be a rather strange demand: “We insist you purchase power from us for another 25 years, and we insist you pay less for it.”

In reality, Silcoff glossed over the fact that Hydro-Québec only wanted the option to extend the contract. In order to guarantee a purchaser into the future, therefore, CFLCo had to sweeten the pot.

After all, who else were they going to sell power to?

Which raises another important question.

The judge was unusually harsh on the testimony of CFLCo’s main witnesses, including an electricity market analyst named John Dalton.

Dalton testified that CFLCo was told there would be no corridor through Quebec for them to sell Upper Churchill power to third parties. In his decision, Silcoff scolded Dalton for providing no documented proof of such a warning.

Nonetheless, the circumstances still present a pretty clear picture.

As the judge duly notes, at the time the contract was signed, there was insufficient infrastructure to transmit power through Quebec. There was no tariff regime in place whereby CFLCo could at least theoretically wheel power to other customers. In short, CFLCo was stuck with its sole customer.

Nalcor intends to appeal the ruling to the Supreme Court.

It will likely be upheld. Even if there’s only a glimmer of hope that the unthinkable may happen, however, it’s worth pursuing.

It’s worth it because the contractual subjugation of the Upper Churchill resource is a wretched thing. It reinforces the age-old insecurities of our colonial past, where the livyers were duped into servility — hauling nets and hewing wood for distant masters.

We are a culture steeped in resentment, a sense of unfairness that sometimes conjures monstrous conspiracies that aren’t even there. Our leaders often play on our fierce pride and suspicion of foreign interests, usually to our detriment.

But why would we not battle mightily against one very real inequity that helps fuel such resentments?

Peter Jackson is The Telegram’s

commentary editor.

Email pjackson@thetelegram.com.