Hydro Quebec's Court date with Nalcor

On the 28th of August, a little over a week from today, sudden death should be coming to the Lower Churchill project. Hydro-Quebec has filed for a declaratory judgement in Quebec Superior Court against CFLCo. According to Hydro-Quebec, CFLCo has been selling power over the 300 MW recall limit to Newfounland and Labrador Hydro in contravention of the Power Contract (1969), and have been doing so since June, 2012 -which is also when construction began on the Muskrat Falls project.

Couple problems with this. The most obvious one is of course it breaks the Power Contract which means, among other things, we will be responsible for damages to Hydro Quebec. However, the bigger by far problem is a ruling against this province means the Water Management Agreement is effectively gutted.

Nalcor's publicly stated plan is two fold. Firstly, Nalcor asserts it can take power from the Upper Churchill as "banked power". However, the Power Contract does not allow any taking of power other than the 300 MW of recall we already get, and the 225 MW that was Twinco's share that now belongs to CFLCo under the Shareholder's Agreement. Second, Nalcor and the Premier have stated Hydro-Quebec is only entitled to a fixed block of power once the agreement renews in 2016, and the remainder belongs to Nalcor. Under that scenario Gilbert Bennett of Nalcor has publicly stated the province could take 1500 MW of power. That power would be purchased from CFLCo at the same price Hydro-Quebec pays and be resold for a profit of about $600 million a year.

However, it's just pure fantasy. The Supreme Court of Canada ruled unanimously in 1984: " the company signed a contract (the Power Contract) with Hydro-Quebec whereby it agreed to supply and Hydro-Quebec agreed to purchase virtually all of the hydro-electric power produced at Churchill Falls for a term of 65 years." That means CFLCo or Nalcor or whomever is not entitled to any power from the Upper Churchill, other than the recall power, until 2041. Period. End of story. It's plain English.

The second right Hydro-Quebec wants declared is its right to operate the plant to its benefit. The aim of course is to stop Nalcor, and the government's Water Management Committee, from taking operational control of the facility that the Water Management Agreement allows them to do. The Power Contract again clearly states that both CFLCo and Hydro-Quebec recognize and agree to operating the plant for Hydro-Quebec's interests.

The point is that on August 28, 2013 Quebec is going to win. What does that mean in reality? It means that the two pillars the government's Water Management Agreement are built on will be destroyed. Considering that CFLCo could only argue in court it was taking this power based on provisions of the Water Management Agreement, the Superior Court may find as well that this agreement is unconstitutional. It might go that far, or it might not. Either way, it guts the Water Management Agreement. Both Nalcor and Hydro-Quebec publicly say the court action is not about the Water Management Agreement, but it is quite obviously so. Even Dunderdale, firing from the lips as usual, stated in a moment of fury that it was meant to stop Muskrat Falls. She added that there were measures to "mitigate" such a ruling though.

Here is what she meant: " Force Majeure event means... (iv) action of any government, legislature, court...and despite all reasonable efforts...adversely affects the performance by such Party of its obligations under this agreement." In other words, Dunderdale was tipping her hand, by way of her mouth, that despite a court decision on the Power Contract rights she intends to proceed with construction of the dam, and taking the power, etc under the Force Majeure terms in the Water Management Agreement.

So, on the one hand, the Superior Court decision in Quebec should stop the project in it's tracks, it won't. Hydro-Quebec will then sit back and watch us build the dam knowing full well it has its rights secured, and that it made our government fully aware of those rights. In that way it can go for damages so large as to bankrupt CFLCo. That's why my lawsuit to get an injunction is crucial. Hydro-Quebec won't stop us from cutting our own throats. Why would they? They have the total Upper Churchill facility to gain. It's up to us to stop the government and Nalcor from doing this damage to us. So, in a week you can expect Hydro-Quebec to win in the courts and our government/Nalcor to continue the Muskrat Falls project. Meanwhile, its been almost three weeks since my leave for appeal was filed here, and Nalcor has been delaying the setting of a date for its hearing.