Hydro-Quebec's challenge on Churchill Falls will fail, Newfoundland premier says - Macleans.ca

Hydro-Quebec’s challenge on Churchill Falls will fail, Newfoundland premier says


ST. JOHN’S, N.L. – The latest skirmish in the energy wars between Quebec and Newfoundland and Labrador has erupted as premiers are set to gather for what could be a tense meeting in Ontario.

Premier Kathy Dunderdale says she won’t shrink from raising with her Quebec counterpart Pauline Marois issues related to a legal challenge that she blasted Tuesday as “desperate” and “arrogant.”

Dunderdale told reporters outside the legislature that she has every confidence a motion filed Monday by Hydro-Quebec in Quebec Superior Court will fail.

The legal challenge involving the Crown-owned utility’s rights to access energy from the Upper Churchill dam is an attempt to foil the $7.7-billion Muskrat Falls hydro project now under construction farther down the Churchill River in Labrador, she said.

“They thwart us at every opportunity and so we have an arrogant, I believe, and a desperate Hydro-Quebec trying now in this final attempt to stop development on the Lower Churchill,” Dunderdale said.

“Hydro-Quebec is not going to set the agenda.”

Her comments came a day after Hydro-Quebec asked the court to affirm its right based on a deal signed in 1969 to buy “virtually all of the power and energy produced by Churchill Falls Generating Station until Aug. 31, 2041.”

The utility takes issue with assertions by the Churchill Falls (Labrador) Corp. that from 2016 — when the Upper Churchill power contract is renewed — until 2041 when it expires, Hydro-Quebec would only be entitled to monthly allotments of energy.

Nalcor Energy, Newfoundland and Labrador’s Crown utility, has argued that it has the flexibility under a 2009 water management agreement with Churchill Falls (Labrador) Corp. to co-ordinate the Upper Churchill dam with the Muskrat Falls power station to meet energy needs in all seasons.

Gilbert Bennett, Nalcor vice-president for the Lower Churchill project, has repeatedly said that related regulations and the water management agreement all respect Hydro-Quebec’s rights under the 1969 deal.

Hydro-Quebec spokesman Gary Sutherland said Tuesday that the Churchill Falls (Labrador) Corp. has the contracted right until 2041 to recapture no more than a 300-megawatt block of Upper Churchill power for sale to third parties. But since June 2012, he said the corporation has sold more than that amount to Crown utility Newfoundland and Labrador Hydro —interrupting deliveries scheduled by Hydro-Quebec under the contract.

“The motion that was filed yesterday is really to obtain an interpretation from the courts on the Churchill Falls contract from 1969,” Sutherland said. “It’s not related to the Muskrat Falls project.”

But critics of the Muskrat Falls development say construction should stop until the legal questions are settled.

St. John’s lawyer Bern Coffey has questioned for months whether Hydro-Quebec might challenge how Nalcor intends to manage water flows between the Upper Churchill dam and the downstream Muskrat Falls project.

“Common sense and prudence would dictate that Nalcor stop spending money until the legal certainty is arrived at,” he said Tuesday.

An affidavit filed last winter by Nalcor in response to a separate constitutional challenge of Muskrat Falls says work at the site near Happy Valley-Goose Bay costs about $500,000 per day.

Dunderdale said the province has done its legal homework and won’t let Quebec dictate its energy policy. She said she’s confident that Hydro-Quebec’s court challenge will fail before the end of the year, and that she will defend her province’s interests when the premiers meet Wednesday in Niagara-on-the-Lake, Ont.

“I believe in candour and in frankness,” Dunderdale said in an interview. “I’m certainly not going to shrink away from any kind of a challenge from Quebec or anyone else that takes a position that’s not in the best interest of Newfoundland and Labrador.”

Meanwhile, Dunderdale said construction of Muskrat Falls continues full steam ahead. Provincial NDP Leader Lorraine Michael doesn’t share her optimism.

“I certainly have never been able to understand where the premier gets her confidence from … with regard to Muskrat Falls and the whole economy of Muskrat Falls with all the different wrinkles that are there,” she told reporters Tuesday. “She just seems to ignore them, and that bothers me.”

The project is scheduled to generate power by 2017.

On Monday, Nova Scotia’s Utility and Review Board gave approval for a $1.5-billion subsea link that would ship electricity from Muskrat Falls to Nova Scotia on the condition that energy customers in that province get the best price for surplus power based on market conditions.

But Nalcor Energy has not committed to offering any price guarantees to private company Emera (TSX:EMA), its partner in the Muskrat Falls development.

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Hydro-Quebec’s challenge on Churchill Falls will fail, Newfoundland premier says

  1. The subsea route is being built because Quebec would not negotiate a fair deal to transfer Lower Churchill power across their power grid, in breach of NAFTA. NL should launch its own suit on these grounds “just because”.

    They should also build extra capacity into their alternate route and tell Quebec that, if they can’t play fair, they lose 100% of Churchill Falls’ output the day the contract ends in 2041.

    Enough is enough. Time to hit the bullies hard.

    • Spoken like a true Newfoundlander. Good for you, Keith!

    • NAFTA did not exist when the Upper Churchill Dam was built. I would expect it’s unreasonable for them to have to comply with its requirements now – unless that was allowed from when NAFTA was drafted.

      • I’m talking about the Lower Churchill (Muskrat Falls). When NL approached QC about routing power to markets in the US across their power grid, they esentially refused unless they were given a deal akin to Churchill Falls II. Williams raised the NAFTA breach then, but didn’t pursue it as he decided it would be better to go around Quebec.
        That doesn’t mean, though, that they still couldn’t take Que to court for their refusal, given Que is going after them in every way they can (rying to get Harper to back off the loan guarantees; now this petty move). Canada’s spoiled child thought it could hold NL hostage for any power they produced in Labrador; it backfired and they want revenge.
        So – time to fight back. And come 2041 – time to leave them sitting in the dark.

        • Okay, fair enough.

          Come 2041 the Upper Churchill agreement comes up for ‘renegotiation’, as I understand it. Not sure what outcomes could result – is one genuine possibility that NL could refuse to involve Qc and route all their power through NS?

          • I honestly don’t know. The contract ends then; I don’t imagine either side foresaw the possibility of an alternate route, so I suspect there is nothing that explicitly requires the sale of power to Quebec after that date.

          • Keith, in regards to your mentioned alternate route

            The Dalhousie Law Journal
            “Following this breakdown, HFPCo considered transmitting power via
            the so-called Anglo-Saxon route, one which Smallwood, frustrated with
            Quebec, favoured. That route involved transmission of electricity from
            the development site to the south coast of Labrador, connecting to the
            Northern Peninsula of the island by subsea cables and continuing from
            there with more subsea links to Nova Scotia. HFPCo concluded that this much lengthier route to market was uneconomic.”

            Taken from study done by James Feehan and Melvin Baker.


          • It was uneconomic. If Smallwood didn’t have the foresight to protect against inflation, he wasn’t going to write a contract on the speculation that a currently uneconomic route would later become so.

  2. We should invade Quebec……I’m sure the rest of Canada would support us. Then we’ll turn the province into a big airport or parking lot. We’ll keep their hydro power though and sell it to the US.

    • Why don’t you invade first, and see who follows?