09 September 2009

Churchill Falls reversion fails for second time

The Newfoundland and Labrador government  is making quick changes to a 2008 law after lawyers for the Churchill Falls (Labrador) Corporation  - CF(L)Co – raised questions about the impact of the bill on the company’s 1961 lease and rights to all property related to Churchill Falls.

Lawyers for CF(L)Co raised the issue with the provincial government’s  NALCOR Energy company during talks on water management for the proposed Lower Churchill project. 

The changes were tabled Tuesday in an emergency sitting of the House of Assembly.

It appears that - reminiscent of the 1980 water rights reversion bill - the 2008 bill stripped CF(L)Co of its lease.

In the original 2008 bill - Energy Corporation of Newfoundland and Labrador Water Rights Act - the Lower Churchill River is described as including “all waters that originate within the Churchill River catchment area and all rivers that naturally flow within the catchment area or from diversions into the catchment area.”

Clause three of the then stated that

any property in and rights to the use and flow of water, previously conferred by a grant, lease, licence or other instrument or under a statute of the province, or vested in, acquired by or accruing to a person by whatever means relating to the Lower Churchill River are extinguished.  [Emphasis added]

By combining the two clauses, the new bill effectively cancelled the 1961 Churchill Falls lease.  The 2008 law also blocked rights holders from any legal action and stripped them of  any entitlement to compensation.  

The bill became law on June 4, 2008.  There is no indication when cabinet issued the license to the energy corporation, now known as NALCOR Energy.

The changes introduced in Tuesday’s emergency session make it plain that the 2008 water rights law applies only to the Lower Churchill and that, for absolute certainty,  the 2008 bill “ excludes the area described in Appendix A to The Churchill Falls (Labrador) Corporation Limited (Lease) Act, 1961, and all waters while they are in that area.”

Emergency sessions are rare

For its part, the Williams administration is downplaying the session and the hasty changes.  In a news release, Dunderdale said that the act was never intended to cover Churchill Falls.

But the very fact the session was called to deal with one set of amendments to one bill suggests the issues involved are far from routine and that the legal implications of the water rights bill would be significant if left unamended.

Emergency or special sessions occur very rarely and usually only deal with extraordinary issues like war or labour disputes that threaten public health and safety.

Ordinarily – and if the implications of the bill were considered inconsequential or inadvertent -   CF(L)Co and NALCOR could simply have made routine amendments in the regular fall sitting a condition of an overall deal on water rights management on the Churchill River. 

Interestingly, the provincial government also tried to downplay the water rights bill in 2008, even to the point of making apparently misleading statements in the legislature.

In June 2008,  natural resources minister Kathy Dunderdale told the House of Assembly that the bill was needed since government had decided against using the  Lower Churchill Development Corporation as the vehicle to develop the Gull Island and Muskrat Falls power projects. 

But the 2008 water rights bill didn’t repeal the 1978 Lower Churchill Development Act, nor did it remove the LCDC option for development of the Lower Churchill.  The 2008 bill merely extinguished previously existing rights, leases, grants and licenses. 

Deja vue

This marks the second time since 1975 that a Progressive Conservative administration in Newfoundland and Labrador has found itself in hot water over legislation related to Churchill Falls.

In 1980 Brian Peckford’s administration introduced the Upper Churchill Water Rights Reversion Act.  The bill expressly cancelled the 1961 lease.  A subsequent legal challenge by creditors led to a landmark decision by the Supreme Court of Canada that ruled the 1980 statute was illegal. 

One of the influential factors in that case was public comments by politicians that identified the real purpose of the bill as being to undo the 1969 Churchill Falls agreement.

If the 2008 water rights bill effectively expropriated the Churchill Falls complex, it would be the second such move by the Williams administration in 2008.  In December 2008, the Williams administration moved to seize assets of Abitibi, Enel and Fortis including hydro-electric generating facilities

Confusion reigns in hydro policy

Revelation of the 2008 water rights ploy is the fourth Lower Churchill-related blockbuster news in a week.

On Friday, natural resources minister Kathy Dunderdale revealed that the provincial government had been trying unsuccessfully for five years to interest Hydro Quebec in an ownership stake in the Lower Churchill project. 

Dunderdale told Open Line Show host Randy Simms and his audience that the provincial government proposed to “set the Upper Churchill [issue] to one side.”

This move came despite commitments by Premier Danny Williams that there would be no Quebec involvement in the Lower Churchill without redress for the appalling 1969 deal that sees Hydro Quebec buy electricity at better than 1/30th the cost for which it is sold to consumers.    Williams has repeatedly railed against the 1969 deal as an example of a resource give-away by previous provincial governments.

The offer of an ownership stake to Hydro Quebec also flies in the face of Williams’ 2006 commitment to develop the Lower Churchill without any outside help:

"It's an opportunity for us to get back some of what we've lost on the Upper Churchill, and the fact that we're going to do this alone is significant," Williams said in an interview.

The Dunderdale revelation came after Williams accused Hydro Quebec of doing everything possible to block the Lower Churchill project. 

Williams also said last week that  his government would no longer plan to string hydro lines from the Lower Churchill through a UNESCO World Heritage site.



Touton said...

Pure speculation on my part but I suspect that after beating every bush that they could find.....including the Chinese, large American power companies, etc. they were told that without Hydro Quebec there is no possibility of financing, power purchase agreements or anything else. So then they had to go back to talk to HQ. In the meantime, the 2008 bill was a poor attempt to bluff HQ and when they recently talked to HQ, the first thing that HQ told them to do before entertaining any discussions was to amend the Bill.

And Danny will never do a deal with HQ because he can't get a deal that gives NL all the upside and none of the risk. Danny thinks that the Lower Churchill sites are far more lucrative than they actually are.

Edward G. Hollett said...

More to the point, Touton, HQ will never cut a deal with DW.

They can't afford the political crap that comes with his whole BS about redress and about the stability of the province.

Touton said...


Not sure if we`re not saying the same thing....

I think that they could do a deal if they believed that it was a straight up business deal and not pure political crap....if the price was right, HQ could tolerate the political crap. Note their lack of response to the 2008 Bill. And why do you think Danny is opening the House now to amend the Bill.

Edward G. Hollett said...

We're definitely in the same neighbourhood, Touton.

But lack of response to the 2008 bill?

I think you are seeing it in this emergency session. I suspect there were some very strong words used to make the provincial government scramble like they are doing.

Hydro Quebec will have a very hard time getting any deal done with a fellow who has sliced into them specifically and Quebec generally.

Charest will face such questions in the Assembly that he will have to bring home something akin to 1969 part two to get beyond them.

By the same token Williams will have to walk on water in order to get beyond a shit storm of controversy down here. Even voice of the cabinet minister would have to swallow hard to ignore a deal where there was no redress on CF after all Williams said.

To me it is political force meets immoveable legacy object.

Here's the danger for the rest of us:

In 1969, NL got itself into a jam after a series of bullshit feints about an Anglo-Saxon route that everyone knew was bullshit (sound familiar).

This administration has exactly zero in the leverage department.

So unless they are prepared to walk away from a deal AND leave Williams is ready to leave the Premier's Office without a deal, HQ can drag this out until the cows come home.

If they don't get everything they want - as they did in 1969 - then they can walk away.

Once NL starts giving, HQ'll keep pushing until they get all they want and more. They have time on their side as they did in 1969.

They don't need a deal. DW and company apparently do.

Williams' attacks on Quebec don't help; in fact they make his position worse.

On the other hand, the more pliable NL becomes, the more likely NL is to get cornered into a deal that is actually worse than the one Grimes had.

With Hebron, the private sector side didn't have to meet the political test of justifying a deal after all the harsh words.

Incidentally, they did extra some significant concessions from the provincial government but those didn't get any coverage, thereby allowing the political side to appear as though they got everything and then some besides.

That sort of manoeuvring wouldn't be possible with HQ, especially since the Quebec media will be ready to slice into anyone who appears to be caving to Williams.

Ultimately, what we are seeing here is the old curse of the Lower Churchill. Because politicians like Williams make these things so heavily political, no one will ever come to a deal.

The only way the river will be developed is if:

1. NL has enough cash to build it alone, for real.

2. The project is done as a totally private sector venture where none of the bullshit we've seen for the past decades applies.

3. NL caves.

But if you want to get a sense of how desperate Williams and company are:

Consider that they were prepared to scream "redress" in public and at the very same time were saying 180 degrees the opposite in private.

What else have they put on the table?

There is a story this last week that the local and national media have missed entirely.

ASnd it's huge.