Dumping Canadian Hydro Power in the US Market

Electrical power exports from Canada to the the United States have traditionally made sense. The Americans had a seemingly endless need for more and more power that they couldn't keep pace with from their own resources. Conversely, Canada had massive hydroelectric sites - tapped and untapped. However, that hydro power relationship no longer makes economic sense. It can be argued that hydro is severely damaging environmentally, and that far better alternatives like solar, wind and wave make far more environmental sense. However, the argument has never been made that Canadian electrical power sales, created primarily by hydro dams, actually break US law.

Consider the following quote from the US Department of Trade:

 "What is Dumping?

Dumping occurs when a foreign producer sells a product in the United States at a price below that producer's sales price in the country of origin ("home market"), or ar a price that is lower than the cost of production. The difference between the price (or cost) in the foreign market and the price in the US market is called the dumping margin."

IN ADDITION:

"Countervailing duties. United States law provides that a countervailing duty (CVD) be applied to imports when a foreign government, person or organization is providing a subsidy conferring an economic benefit to a "class of kind" of merchandise exported to the US. Actionable subsidies may include benefits conferred directly on exports or benefits that indirectly subsidize exports."

So, the question is: Do Newfoundland and Labrador hydroelectric power sales to the United States constitute "dumping?". The answer is yes.

The cost of producing Muskrat Falls electrical power and transmitting it to the Soldier's Pond transit station for export, was estimated at 23.9 cents per kwh way back in 2012 when the project was at the DG2 process and he price was in the vicinity of $6 billion (see here). Since then the project is now estimated to be over $2 billion more that originally forecast, and we have yet to see another "cost per kwh hour to Soldier's Pond" estimate. Furthermore, Nalcor must pay transmission fees to Emera of Nova Scotia to use the Maritime Link sub sea cable in order to transmit that power to Nova Scotia and then to the US. It must also pay transmission fees to New Brunswick for using its lines. It becomes very obvious that the cost to produce Muskrat Falls hydro power is atmospherically high.

Then consider that the entire project is being built by a Crown Corporation which is solely owned and subsidized by the Newfoundland and Labrador government, and the same government is investing over $3 billion directly into its construction. Then there is the issue of the Canadian government's $5 billion dollar loan guarantee to build the project, which reduced Nalcor's 50 year bond costs to below 3%. All in all, this project is a state owned and heavily subsidized venture. That in itself isn't a problem, but when you want to take that same power and export it to the United States it becomes one.

In the US 69% of plants are owned privately, but public ownership controls 73% of production - in other words there are a lot of small plants, but the big ones are owned by governments - primarily the US federal government. That is one aspect, but here is another - natural gas generated electrical power in the US is 5 times that of local hydro power (see here). In other words, natural gas generated electricity is a dominant player on the domestic US market.

Is Canadian hydro power sold into the United States at a loss? Take Muskrat Falls power as a case in point. As stated earlier, the conservative estimate of a kwh of Muskrat Falls power to the export point in Newfoundland was 23.9 cents at DG2 - it's much higher now. Now consider that the average price per kwh in the US for 2015 was about 2.5 to 3 cents a kwh (see here). That means Newfoundland and Labrador would be exporting power for sale into the US at about an 800% loss. Clearly, that is dumping in the extreme. In fact, and more importantly, it could cause US producers of natural gas to be less competitive in their own market by artificially depressing the market, and restricting their profits to expand - ditto for solar power or other such production.

Combine the obvious dumping of this province's power with the provincial and federal subsidies used to create it, and it seems like a very strong case of dumping could be made with the US Treasury and Commerce Department. Will it ever come to that? Frankly, I'm surprised it hasn't yet. It seems logical that US private producers would resent Canadian power being dumped on their market.

How bad is Newfoundland's Budget Crisis?

Newfoundland and Labrador is in the "mother of all" budgetary crisis. It is not a pretty picture. For those that don't quite get all the government lingo: a deficit is the annual loss caused by spending more than you bring in a fiscal year; the debt is the accumulation of all the money borrowed to finance those accumulated deficits over the years; operating budget is the base cost of running government operations in a year; capital budget is the cost of building facilities in a given year; and gross debt is the amount of all debt the government owes and must pay back. That's a bit of a simplification, but it does the trick.

Back when the 2015-2016 budget was crafted, the government projected $6,659,952 (billion) in operating expenses and $1,143,743 (billion) in capital expenses, for a total of  roughly $7.8 billion in expenditures. To fund those expenditures the government projected oil revenue to be $1,157,671 billion based on a base price of $62 (US) a barrel for Brent Crude. With oil at that level, the government predicted a $1 billion deficit. As a result of the recent election defeat of the government, a new deficit figure of $1.8 billion was released. In other words, the new Liberal government is saying the province has lost approximately $700 million in revenue.

The problem is things are much worse economically then they were at budget time. Oil has hovered at roughly $40-45 a barrel for most of the fiscal year, and has been trending downward (at $37.70 now). Yet, despite the collapse of the province's largest single contributor to revenues, the government has done...nothing. Here is a very illuminating example:

2013/2013 - oil revenue   $2.25 billion      Total government spending -   $7.6 billion

2015-2016 - oil revenue  $1.2 billion         Total government spending-    $7.8 billion

If that set of numbers shocks, well, it should. Now, that figure for oil revenue above was based on $62 a barrel. Just shaving off approximately 30% from that number for oil's actual prices, and we are down approximately $360 million - which leaves oil revenue for this fiscal year closer to $800 million. You have to travel back to the year 2007 to find a time when oil revenue was this low in recent history. In that year, oil was budgeted to bring in $996.5 million. The kicker is this: total budgeted spending for that year, including operating and capital, was $5.2 billion - $2.6 billion less than what is being spent today.

All of this takes on a pretty ugly picture when you consider that debt servicing charges (interest,etc on our debt) was budgeted to be $652 million this year alone. Furthermore, our combined capital and operational gross debt is now $13.9 billion. That is only $1 billion less than the perilous period of 1997-98.

So what can be done? Or, what has to be done? Both nothing and everything. The nothing portion is capital expenditures. The province can no longer afford any capital expenditures. Sound radical? Consider that capital expenditures have been in the $1.1 billion range for a few years now. That's no longer doable. That means: no new hospital for Corner Brook (or anywhere else); no new Waterford mental health facility; no new penitentiary; etc. In other words, any election promises that were related to these projects are out - they were never honest in the first place.

Raising taxes of all kinds and types will be the feature of the next budget. Sin taxes. Income taxes, Taxes on your taxes. You get the idea. However, even taxing all these areas, the government can only pray to come up with maybe $150 million, and that would mean huge personal income tax increases. After all, Ball just vetoed increasing the HST by 2%, which could have meant about $150 million for the provincial coffers. Still, that would have been a drop in the bucket for what's necessary to keep this government where its at.  Cutting civil service jobs has been ruled out by the Liberals. Salaries and benefits of provincial employees accounted for about $905 million in this year's budget. The salaries in the health sector and education sector are administered by the respective authorities. The word is they account for about 75% of the $4 billion that the province issues in grants to the authorities to run their health/education organizations.

It has to be a tempting, if not an absolute necessity, to review these employee expenses. The civil service is way too large for a province this size. The Liberals claim they will reduce it by attrition - which is a fancy way of saying once people retire they will eliminate those positions from the province's structure. Sounds great in the ideal world, but the budget crisis needs immediate heart surgery, not rehab. It can't wait that long.

Muskrat Falls is another one that must be looked at. The government has spent its part on the project already (not including over runs), so that $3 billion is gone from general revenues. However, Nalcor is holding $5 billion in investment accounts that it borrowed under the Federal Loan Guarantee. As far as I know that $5 billion hasn't been accessed yet. The province could cancel the Muskrat Falls project, work a deal with their new buddies in Ottawa to return the funds while avoiding default, and the gross debt of the province would shrink to about $8.8 billion. Such a move would dramatically improve the province's long term economic health, and perhaps forestall the otherwise inevitable credit downgrades coming our way. In addition, should Nalcor lose the current Quebec court case (now waiting for the Judge's decision as it was heard in October) Muskrat Falls annual revenue generation will drop by approximately 80% require a tripling of power bills to allow the project to break even year after year. All in all, Muskrat Falls needs to be the first victim of the financial sanity axe.

In summary, Dwight Ball is on the record as not wanting to harm the economy by instigating drastic tax hikes or mass layoffs. He's on the record as not wanting to shut down the Muskrat Falls project (he wants to "manage it better"). He's on the record for assisting iron ore companies to buy out other iron ore companies in Labrador. All these things are just pure fantasy. Complete non-sense. The truth is, bonding agencies will force the government to cut its spending - drastically. Banks will likely do the same. Newfoundland and Labrador was completely mismanaged during the years when oil revenues to the province numbered in the billions. Now, that luxury, as stupid as it was, is no longer available to politicians. Now the chickens have come home to roost. It's simple math. How bad is Newfoundland's budget crisis? It's systemic and it's catastrophic. That's how bad it is.

Newfoundland's Final Humiliation

There are few things that Newfoundlanders, and the province in general, are more afraid of than being made to look stupid. No body does. However, here it is taken to a higher level. There is a history of the "Newfie jokes" or even the just the term "Newfie" by itself, that boils the blood. The connotation is that somehow a Newfoundlander is doomed by birth right to be inferior to the rest of Canadians.

There are a lot of theories on why Newfoundlanders are so self-conscience about what others think of them. My own theory is that losing your country to become a province is a hard pill to swallow. It affects the collective psyche in ways that run deep and can last a long time. It's doubly hard for a proud people. That's why even today you will commonly hear the young and old refer to Canada as a separate entity: "just got back from Canada". Of course the reality is one doesn't leave Canada if travelling to the mainland. The reality is we are one country now, but the ground between the soul and reality is murky at best.

Another source of humiliation, that has become anger and resentment, is the Power Contract 1969 with Hydro-Quebec. In that case Premier Smallwood, all busied with big names like Winston Churchill and the Rothschilds, had the province agree to a 198 year lease of the Upper Churchill that allowed the Power Contract to be signed and gave Quebec control of the facility for a pittance. The actual annual pittance today is about $2 billion for Quebec and $65 million for Newfoundland and Labrador. Since the early 1970's the dollars from the project have left the province and the people followed. Smallwood's great cry was "industrialize or perish". The result was Quebec industrialized on cheap Labrador electricity and Newfoundland perished.

Fast forward to 2003, and the election of Danny Williams and the PCs. Williams got elected just as the beginnings of oil money started coming in. Williams was determined to undo the wrongs of the Power Contract, bring back nationalistic pride that he saw as robbed by the agreement, and show Hydro-Quebec the door. He created the "Energy Plan" in 2003, created a state owned monopoly (Nalcor) in 2007, and amended/created all types of legislation in between time to put the path in place. Come hell or high water he was going to make things right. Most Newfoundlanders, including this one, applauded at the notion of historical redress.

Then it came off the rails. Hydro-Quebec's directors on the board of CFLCo (the corp jointly owned by Hydro-Quebec and Newfoundland and Labrador Hydro 'NL Hydro') vetoed the Water Management Agreement that Nalcor's directors on NL Hydro and Nalcor itself had negotiated. Within a month Nalcor was knocking on the Public Utilities Board's (PUB) door for an imposed Water Management Agreement (WMA) - as per the aforementioned  amendments Williams did to legislation back in 2007.

The PUB passed the Water management Agreement, without as much as a coma being changed, just as Nalcor had put it forward. Apparently, in June 2012 Nalcor began taking more MW from the Upper Churchill than it was allowed - which the WMA authorizes them to do. Quebec sat back and waited.

As part of my own lawsuit against the Government and Nalcor regarding the Muskrat Falls project, I served Hydro-Quebec with a letter inviting them to be an intervenor in the case. I informed them contractual rights under the Power Contract would be at issue. My purpose was to put them on formal notice, that if they refused to act they would be acknowledging the province's right to usurp their Power Contract rights. That would set a legal precedent, and they would be unable to come back at a later date and argue they were unaware of the case. In a sense, I pushed them from waiting in ambush for us to finish Muskrat Falls and then take us to court. Within 2 days of my initial injunction failing at the Supreme Court of Newfoundland and Labrador, Hydro-Quebec filed suit in the Superior Court of Quebec - ambush firmly tripped.

On January 20, 2013, 11 days from now, Hydro-Quebec's motion will be heard. It asks the Court to declare two things: 1. That Newfoundland and Labrador is not entitled to more than 300 MW of recall power plus the old Twinco block; and 2. That it has the right to manage the facility (which includes roads,switchyards,etc) in accordance with its needs - and only its needs. Both these rights are firmly established in the Power Contract and the Supreme Court of Canada's Review of the Reversion Act 1984. This province has no chance, and when I say no chance I mean zero chance, of winning these issues in court.

Getting to the meaning of the title of this article - the final humiliation. Estimates of exactly how much money has been spent on Muskrat Falls so far are hard to get. Conservatively it ranges from $800 million to $1 billion. Now the people of Newfoundland and Labrador, blinded by the nationalistic rhetoric of the Williams years, have to face the reality that the very foundation of the Muskrat Falls/Lower Churchill project is not valid. Without it there is no "banking" of power, no lines to mines, no power for the Island and no power for Nova Scotia. It is the kind of disgrace you don't wish upon your worst enemy. Williams will have succeeded in giving the province one last real humiliation on the national stage - one his old friend Harper was only too eager to assist with. For that I can not forgive him.  

On Mainlanders, CFAs and the like

This post is personal to me. It's not about cold, abstract politics. Nor is it about personalities, graft or corruption. No, this post is what it means to be degraded. Degraded not for who you are as a person, as a father, as a husband, as a son. Not for what you have accomplished in life or the people you have touched along the way. No, this degradation is solely based on your place of birth.

While Newfoundlanders like to be seen as friendly and hospitable, there is an ugly side. People born outside the province, who move to the province, are referred to as "mainlanders" or "come from aways" (CFAs is the common term used). I have even heard the term "foreigners" used. The terms are not meant as playful labels. They are meant to separate the newcomers from those born in the province, and the implication is these newcomers are somehow inferior.

My first experience with this prejudice occurred during a political convention of the PC party in St. John's. Sitting in the audience, and taking in my first political convention here, it was a time of real excitement. Joining me was my wife who, along with me and my family, had uprooted our lives out west to return to my roots (more of that later). On the stage was a gentlemen named John Dinn. I didn't know him from Adam, but he was a MHA and I was eager to take in what he had to say. He began talking about Canadians and then he said the words that struck my heart: "but we are better than them". The crowd roared with approval.

In one short moment I was instantly alienated from the people of my forefathers. In that one instant I realized that there was a poison in the water. A need to look down on others for a sense of superiority. A deep routed, commonly cherished place to retreat where at least among ourselves there were those beneath us. I have come to believe, through life experience, that those that look down upon others are compensating for something lacking in their own soul. A sense that without that common arrogance we might just vanish as a people. The opposite of pride. A great inferiority complex. That to make ourselves strong we must keep others down.

I was shocked, and remain so, that the Newfoundland I was brought up with in family stories was so tragically different. You see, my people come from here. In 1820 my great-great grandfather emigrated to Newfoundland from Tipperary, Ireland, along with many others at that time. His name was Micheal O'Meagre. He settled in Bonavista Bay, and had three sons. Two sons, Catholics, married Protestant women in Greenspond, and were banished from the family - such was the religious intolerance of the day. The third son, my great grandfather, married a Hollohan from Summerville, settled on Burnt Island, and fathered a large family.

Times were hard then, and the two eldest boys went to Montreal to work in construction.  In 1907, while returning from Summerville to Burnt Island, my great grandfather William Maher (as the name had been changed to) and a Kelly were struck by the boom of his schooner, knocked over board, and their bodies were never found. My great grandmother struggled to feed her daughters after that, and they all moved to Montreal to join her sons - my grandmother being the youngest. They struggled, and yet they persevered.

I never knew my grandmother to ever look down her nose at another. She was a strong woman who spent her life looking after her family. She was quiet, wise and kind. The tragedies of her life, including losing her father at a young age, never broke her spirit or poisoned her temperment. Her stories of Newfoundland, and the family were always tempered with humility. Her pride came from deep within, and never at the expense of another.

It was with her spirit in mind that I moved to Newfoundland - in my mind returning to my roots, my ancestral home. Nothing prepared me to be seen as somehow unfit or inferior. Nothing prepared me to hear the anguish of my children as they suffered daily ridicule at school for being "dumb mainlanders" or "CFAs". Nothing can really prepare you for that kind of society-sanctioned hatred. Even in my own harbour. A local had asked to tie off his boat to my dock, which of course I agreed to. As is the case, we struck up our usual conversation. The topic switched to my children who had finally had enough degrading and moved back west with their mother. I explained to him why, and to my shock he began laughing. It was funny in his mind, as he explained, that Newfoundlanders were the butt of "Newfie" jokes, as he put it, and now the shoe was on the other foot. In disbelief I untied his boat. The sickness of deep hatred and contempt weighing heavy on my soul. Somehow, a victory could be stolen from the suffering of children?

My point in writing this blog is to shed a light. That hatred and false pride produce nothing but poison. Poison to the personal and collective soul. That Newfoundlanders can be proud of who they are without demeaning those that, by choice, become Newfoundlanders themselves. That there is no magic being born on these shores, but rather what is contributed while we live on them. That no society is of a pure blood strain, and emigration has always been a fact of life throughout Newfoundland's 500 year history. Without it there would be but a place. The pride and place that Newfoundlanders seem preoccupied with comes from lifting people up, and not tearing them down. A truly proud people are not disdainful of others, but welcome them as equals. This is the Newfoundland I hope to see. I say this as a Newfoundlander.

The Power Contract vs. the Water Management Agreement

What most Newfoundlanders and Labradorians do not understand is the Lower Churchill hydro development is built on one foundation - the Water Management Agreement imposed by the Public Utilities Board on CFLCO and therefore Hydro-Quebec. The other thing they are not readily aware of is that when this agreement is found unconstitutional there is no foundation to build the Lower Churchill dams.
The Supreme Court of Canada, in 1984, found the Reversion Act to be unconstitutional:

"Where, however, the pith and substance (true purpose) of the provincial enactment is the derogation from or elimination of extra-provincial rights then, even if it is cloaked in the proper constitutional form, it will be ultra vires (unconstitutional because it is outside the province's powers)."

When I stood in the Supreme Court of Newfoundland and Labrador last month, challenging the Water Management Agreement (WMA), I outlined the many critical ways this agreement broke the Power Contract of 1969. I did so not to protect Quebec, but to stop our own government from delivering us to them. The following points were gone through point by point to illustrate to Madame Justice the depth of the betrayal. On this, Memorial Day in Newfoundland, I believe it is important to make these points public so the people of the province understand the sacrifice before it they are lead into it.

1. Power Contract:
"Recapture means any withholding from the power and energy agreed to be sold hereunder which may be made by CFLCO in accordance with the provisions of, and within the limits stipulated by, Section 6.6..."

WMA:
No definition for recapture.

My take: Any power generated at the Upper Churchill, except the power allocated to Twin Co that now belongs to Nalcor, and the 300 MW allocated to the province, cannot be taken from the Upper Churchill facility. Key phrase here is: "made by CFLCO".

2. Power Contract:
"Applicable Law: This Power Contract shall at all times and in all respects be governed by, and interpreted in accordance with, the laws of the Province of Quebec."

WMA:
"Applicable Law: This Agreement shall be construed, interpreted and enforced in accordance with, and the respective rights and obligations of the parties shall be governed by, the laws of the Province (NL) and the federal laws of Canada applicable therein, and each party hereby irrevocably and unconditionally submits to the exclusive jurisdiction of the courts of the Province..."

My take: The Power Contract puts the rights of the contract in Quebec, and thereby all the powers of the contract. The WMA changes the location of those rights to NL, with the goal of changing constitutional jurisdiction. In other words, by way of legislation the government is attempting to alter the practical jurisdiction of Quebec over the operation of the Upper Churchill.

3. WMA
"Entire Agreement: This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, undertakings, negotiations and discussions, whether written or oral."

My take: It pretty clear, the WMA states it is now the predominant agreement, which automatically subordinates the Power Contract and forces CFLCO to recognize the requirements of the WMA over those of the Power Contract between CFLCO and Hydro-Quebec.

4. Power Contract
"The parties hereto acknowledge that it is desirable for Hydro-Quebec to have the benefit of operational flexibility of CFLCO's facilities... Accordingly... Hydro -Quebec may request CFLCO to operate the Plant (includes reservoir) so as to supply Hydro-Quebec's schedule of power requirements...Hydro-Quebec may require deliveries which have the effect of varying the amount of water to be carried in storage at any time..."
   
WMA
"The Independent Coordinator (appointed by the NL government), shall, based on the information provided by the Suppliers (Nalcor and CFLCO), and in the exercise of reasonable judgement, establish short and long term Production Schedules for all the Production Facilities on the Churchill River...The Independent Coordinator shall determine the total power to be produced...The Independent Coordinator shall determine and prepare the Production Schedules which shall specify the amount of power to be produced by each Supplier's Production Facilities in accordance with this Agreement."

My take: It's pretty clear. The WMA takes the right of control of production given to Hydro-Quebec and gives it to the "independent coordinator" who is an appointee of the NL government.

5. Power Contract
"Either party may at any time, for the purpose of safeguarding human life or protecting from major damage the storage, generating or transmission facilities of CFLCO or the Hydro-Quebec system, discontinue or reduce, but only to the extent necessary, the supply of power and energy hereunder."

Power Contract
"The Firm Capacity shall be available at all times when Hydro-Quebec has requested it. In addition whenever additional capacity can, in the opinion of CFLCO, be made available, such capacity shall also be available to Hydro-Quebec on request."

WMA
"CFLCO and Nalcor shall adhere to the Production Schedules set by the Independent Coordinator... Each Supplier shall continue to have the same rights to store water in its reservoirs as it did prior to this agreement, while at the same time recognizing the requirement to, allow Energy Banking (the taking of power from the Upper Churchill from CFLCO to Nalcor) by the other Supplier pursuant to the terms of this Agreement."

My take: Under the Power Contract Hydro-Quebec has the rights to all the power produced at the Upper Churchill, and only loses control in case of a disaster or protecting its electrical system. Because it has first rights, any power taken from it, including so called Banked Energy to Nalcor would have to be purchased from Hydro-Quebec, unless it waived its rights to that power and money - which is highly unlikely. This is simply an attempt by Nalcor to force Hydro-Quebec to use or lose the power potential of the Upper Churchill - which conflicts with the Power Contract.

6. WMA
"In no event shall the generating Capability, storage capacity, or transmission Capability available to a Supplier from all Production Facilities on the Churchill River be less than the amounts of then available generating Capability, storage capacity, or transmission Capability of the Production Facilities owned by that Supplier on the Churchill River."

Power Contract
again: "The parties acknowledge that it is desirable for Hydro-Quebec to have the benefit of operational flexibility in relation to the Hydro-Quebec system. Accordingly: Hydro-Quebec may request CFLCO to operate the Plant so as to supply Hydro-Quebec's schedule of power requirements, provided that no such request shall be less than the Minimum Capacity...Hydro Quebec may require deliveries which have the effect of varying the amount of water to be carried in storage at any time..."

My take: The WMA here requires the Upper Churchill to operate at full capacity which gives Nalcor the flow of water they need to run the Lower Churchill dams. Without this clause, Hydro-Quebec could just keep running the dam for its requirements, as the Power Contract grants them the right to, and the Lower Churchill dams would be forced to run at just 20% capacity - a financial disaster.

7. WMA
"Energy Benefits: Energy Benefits for each Supplier shall be determined by the Water Management Committee, in accordance with the Agreement, for each period established by the Water Management Committee, which period shall not exceed a year...Energy Benefits means the Energy accruing to a Supplier for a period as a result of this Agreement in excess of the Energy that would be accrued to such Supplier for such period in the absence of this Agreement..."

Power Contract
Again "The Firm Capacity shall be available at all times when Hydro-Quebec has requested it. In addition whenever additional capacity can, in the opinion of CFLCO, be made available, such capacity shall also be available to Hydro-Quebec."

My take: The WMA gives the Water Management Committee the right to give power produced at the Upper Churchill to Nalcor, without a power purchase agreement with Hydro-Quebec to compensate it, at its terms, which translates into a forced recall of Upper Churchill power to Nalcor. In other words, Nalcor gets to take power that it has no right to, and doesn't pay anything for it. Great plan, except it's already proven law by the Supreme Court of Canada that this is unconstitutional and therefore illegal.

8. Power Contract
" Force Majeure: contract not terminated. No event or force majeure or of default hereunder shall give rise to, or result in, the termination of this Power Contract..."

WMA
"Force Majeure means an event, condition or circumstance or combination of events, conditions or circumstances beyond the reasonable control and arising without the fault or negligence of the party making a claim to section 14.4 of this Agreement, including, without limitation:...(iv) action of any government, legislature, court or other governmental authority, compliance with applicable law, regulation or order if a governmental authority... An Effected Party shall be excused from the performance of its obligation hereunder or liability for Damages to the other party, if and to the extent it shall be delayed in or prevented from performing or carrying out any of the provisions of this Agreement, except the obligation to pay any amount when due..."

My take: In other words, while technically the agreement says the Power Contract can not be "adversely effected" it gives both CFLCO and Nalcor an out from respecting the contract by way of this WMA. It says a government action, regulation, act, etc can be a considered a Force Majeure, technically out of  the control of both CFLCO and Nalcor, yet both are owned primarily by the government. The effect of this clause is to give Nalcor and CFLCO legal cover from being sued by Hydro-Quebec for violating the Power Contract as they are simply following legislation. This clause makes obvious the government's intention to destroy Hydro-Quebec's rights under the Power Contract.

There are any number of additional issues with the WMA including such things as maintenance of the facility, and the like that also conflict with the Power Contract. What I have outlined above are some of the main points. What any Court must decide is whether or not the WMA "derogates" the terms of the Power Contract. If it does then its unconstitutional. Derogate is defined as: " To take away; detract. To deviate from a standard or expectation; to go astray." That is the standard the Supreme Court of Canada set down in the Reversion Act case of 1984. That decision was unanimous, and therefore that standard can not be altered by any court. The quote I placed in the second paragraph of this article rings loudly. Here is the second quote from that decision that you need to know:

"even if the flow of electricity to Quebec continued at the same rate and at the same price after coming into force of the Act, it would then be in the form of a privilege rather than an enforceable right. All this, in my opinion, points to one conclusion: the Reversion Act is a colourable attempt to interfere with the Power Contract and thus to derogate from the rights of Hydro-Quebec to receive an agreed amount of power at an agreed price."

A few of the local press, and some PC Party operatives have suggested what I am doing by challenging this agreement is assisting Hydro-Quebec. Some of my interested friends have noted that Hydro-Quebec hasn't said a word about it. Frankly, nobody has. Why? Well in Hydro-Quebec's case they are likely mad I've tripped up their ambush of Newfoundland and Labrador - waiting as they are for us to build it and then shutting us down in court..$10 billion later. In everyone else's case, well it's like a collective holding of the breath. So far at least $800 million has been spent by our government, and people cannot comprehend such a massive amount of money would be spent on something unconstitutional and therefore illegal. This also involves the governments of Canada and Nova Scotia.

Billions are at risk. The silence is deafening, but the facts remain.