Here's to the crazy ones, the misfits, the rebels, the troublemakers, the
round pegs in the square holes... the ones who see things differently -- they're
not fond of rules... You can quote them, disagree with them, glorify or vilify
them, but the only thing you can't do is ignore them because they change
things... they push the human race forward, and while some may see them as the
crazy ones, we see genius, because the ones who are crazy enough to think that
they can change the world, are the ones who do.

Steve Jobs
US computer engineer & industrialist (1955 - 2011)

Sunday, March 10, 2013

Newfoundland and Labrador's Waterloo - The Lower Churchill

You may have noticed in the last month or so my posts have been few, and far between, as I have been embroiled in a constitutional challenge of the Lower Churchill/Muskrat Falls hydroelectric development. This challenge is ongoing, albeit sporadic at the moment. Like every battle, there are long periods of boredom interspersed with sheer moments of terror (although that is overstating it on my part, but likely not on some people's part). And in a moment of quiet I take this time to share a few thoughts.

Often in life, as is the case here, it is not what people say, but rather what they don't say that should peek our curiosity. Lies of omission rather than outright lies. The grey area between the lines. Most of us, in our day-to-day lives, simply don't have the time or inclination to truly examine the lines fed to us by  our politicians. We take comfort in the fact that they are restrained by the law, and even though we see them as self-interested at best, we believe that interest is restrained and we are safe.

In the case of the Lower Churchill project, to borrow a line from former premier Williams, " nothing could be further from the truth". The fact is Williams proceeded, like the Abitibi expropriation, with an "I'll do what I want, take me to court",  which was typical of his ego centered policy decision-making process as premier, and in some ways in his business dealings as well.His determination to reach an objective, with apparent lack of care for the inevitable consequences was admired when it came to such things as the Atlantic Accord. However, as Napoleon found out in Russia, over-reaching ambition with little or no regard to the factors limiting your goal can, and likely will, result in failure. In Napoleon's case, as in the case of every other empire in world history, the stubborn refusal to acknowledge the limitations of his power, and to become over extended, resulted in the collapse of his empire and country. The people of France paid a price the country never really recovered from. This is about to be the case for Newfoundland and Labrador.

Since Williams came to office, and with the creation of his "Energy Plan", his focus was to use every aspect of the provinces resources to their maximum. Nothing wrong with that on its face. However, in his determination, some say ego, he refused to acknowledge that through historical mistakes the Upper Churchill was captured by Quebec. In a business decision, between Brinco (a private corporation owned by people like Winston Churchill, the Rothchilds, etc...including Joey Smallwood) and Hydro-Quebec in 1969, the power created from the Upper Churchill was sold for a seventy year pitance. This province has witnessed government after government attempt to undo the damage that one private monopoly visited upon it with the blessing of the government of the day. They have all failed.

Williams decided he would not follow that sorry record. In 2007 he ammended the Electrical Power Control Act to force water management agreements upon power producers sharing the same river. Then in 2009 Nalcor got such an order against its own subsidiary CFLCo, and thereby Hydro-Quebec, forcing in a sense an amalgamation of the Upper Churchill dam into a new Nalcor dominated operation.
The water management agreement stripped Hydro-Quebec of the operational control of the dam and gave that power instead to a water management committee. The new water management committee consists of four people - two appointed by Nalcor and two appointed by CFLCo (which is dominated by government of Newfoundland and Labrador appointees). In other words, the water management committee is now controlled by the government and it in turn controls the Upper and Lower Churchill. With this power it intends to redistribute power generated at the Upper Churchill, and take between 1500 to 2000 MW a year from Hydro-Quebec for its own use. The two power lines being built from the Upper Churchill to Muskrat Falls are capable of transmitting 2000 MW, and the sub sea link between Labrador and Newfoundland is capable of being upgraded to 1900 MW with minor alterations. Most Newfoundlanders would argue this is a great thing, and how could anyone who loved the province argue against it let alone fight it.

Here's the thing, its not legal. It's unconstitutional. Back in 1984, when Brian Peckford attempted the Water Rights Reversion Act, the Supreme Court of Canada ruled it ultra vires (outside the province's constitutional power). Bottom line, the Power Contract of 1969 was governed by the laws of Quebec, and therefore any law infringing on Hydro-Quebec's right to operate the dam and sell its power was unconstitutional, and therefore illegal. This is the great Russian winter that our modern day Napolean (tongue firmly planted in cheek) chose to ignore. In fact, way back in 1984, the Supreme Court of Canada had this to say about Newfoundland's position:

"It was argued by the Attorney General of Newfoundland that control over the power generated at Churchill Falls is essential for the effective management by Newfoundland of its water resources and to meet the energy needs of the Province. However, it is not for this Court to consider the desirability of legislation from a social or economic perspective where a constitutional issue is raised...Where governments in good faith, as in this case, invoke authority to realize desirable economic policies, they must know that they have no open-ended means of achieving their goals when there are constitutional limitations on the legislative power under which they purport to act. They are entitled to expect that the Courts, and especially this Court, will approach the task of appraisal of the constitutionality of social and economic programs with sympathy and regard for the serious consequences of holding them ultra vires. Yet, if the appraisal results in a clash with the Constitution, it is the latter which must govern. That is the situation here...and it follows that the Reversion Act is ultra vires."

And so it goes here. Putting lipstick on a pig, Williams and company charged ahead with the Lower Churchill. Hydro-Quebec, as strategic as ever, sit back and wait for the prey. They know what Williams did was illegal. They know that all they need to do is let this province build that dam, using all its resources to do so, and then the moment the government tries to apply the restrictions of the water management agreement upon them they go to court, win, and CFLCo is bankrupt. They also have first right to the shares of CFLCo and they have the right to operate the dam when CFLCo goes bankrupt. Set, game, and match.

This province's gross debt at the end of 2012 was $13.3 billion. Building Muskrat Falls, the transmission system, and the link to the Island will add another $10 billion or so. By 2016, the same year the Power Contract renews for another 25 years, we will have a gross debt in the range of $25 billion. When Hydro-Quebec springs its court case, around the same time, and wins, we will be unable to continue paying for Muskrat Falls, the link, and the transmission system. The federal loan guarantee says if any one of these parts goes into default they all go into default. It also states the federal government alone is entitled to these assets in the case of default. The end result is Newfoundland and Labrador loses the Upper Churchill to Hydro-Quebec permanently, it loses the Muskrat Falls project to the federal government who can sell it to whomever (likely Hydro-Quebec), and the people of this province are left with a massive debt that, with a declining population, will permanently cripple the economy and people. This is the natural consequence of Williams actions. And this is why I fight.

A billion dollars has already been wasted. A political scandal for the ages. But, even at that, its a better scenario than continuing the madness. If only Napolean had pulled his troops back before
the onslaught of the Russian winter he may have saved his entire empire.  Yet, ego drove him forward, and in the end he left his troops to freeze to death in Russia while he escaped back to France. Today we have the tools to stop our modern day Napoleans from delivering us into a similar fate. It is incumbent on us to use them.


  1. Brad this is a very interesting story. I would love to hear what some constitutional lawyers have to say about this. Surely they can't all be so stupid to go forward with this knowing what can happen.

  2. I'm quite sure they are well aware of the constitutional grounds they walk on. They attempted to use policy and regulation to try and get around it, but the Supreme Court of Canada has been crystal clear, as quoted here in the Reversion Review, that a pig with lipstick is still a pig.

  3. Brad I don't know how all this is going to pan out but you are certainly raising some interesting points. I have no idea if you are right or not but I have never heard a question answered that has not been asked. Good luck

  4. Wow thank you for all the info. I came here for advice on lawyers in Newfoundland and this is a very interesting story! Thank you for all the info. Just reading your story makes me wonder how much water is wasted under poor management.

  5. Thanks for sharing this! I've been trying to find some lawyers in Newfoundland for a while, but have had no idea what to look for. But these had some great tips and suggestions! Thanks for sharing.


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