NALCOR'S Water Management Agreement (not agreed to by Hydro Quebec) is in many respects, an agreement with itself. SCROLL DOWN to see Hydro-Quebec's letter of 2009 rejecting Nalcor's so-called Water Management Agreement
"Water rights are crucial" , The Telegram, Nov. 5, 2012
Also:
Listen to CBC interview with Nalcor's Gilbert Bennett, lawyers Bern Coffey and Dennis Browne (and reply from Hydro Quebec)
http://www.cbc.ca/player/Radio/Local+Shows/Maritimes/Information+Morning+-+NS/ID/2299040257/
Seems Hydro Quebec has quite an arsenal of legislative/contractual and other agreements in their favour:
1. Reasonable Action. Any "reasonable" person would either, first, get approval from Quebec Hydro, or two, get a court decision on whether or not Nalcor (through its Water Management Agreement) or whether it is Hydro Quebec, that has the over-riding authority to determine the amount of water in and flowing from the Churchill Reservoir.
A reasonable person would do so BEFORE locking the province's ratepayers into a $10-15 billion project that might first and foremost (and by law) have to be operated in a way that is under the control of Hydro Quebec --- and which existing contracts seem to say that where any additional power is produced that such additional power has to be for Hydro Quebec's benefit FIRST (and perhaps even solely), for their benefit.
2. Legal Basis. The Water Management Agreement between Nalcor and CF(L)Co has been established pursuant to section 5.5 of the province's Electrical Power Control Act (EPCA) ----- PUB Order NO. P. U. 8(2010), refers (excerpt below):
"WHEREAS on November 10, 2009 Nalcor Energy ("Nalcor") filed an application, pursuant to section 5.5 of the EPCA, for an order of the Board of Commissioners of Public Utilities (the "Board") establishing the terms of a water management agreement between Nalcor and Churchill Falls (Labrador) Corporation Limited ["CF(L)Co"] with respect to the Churchill River (the "Application")";
Section 5.5 of the EPCA, states (in part):
5.5 (1) Where 2 or more persons to whom subsection 5.4(1) applies fail to enter into an agreement within a reasonable time, one or more of them may apply to the public utilities board to establish the terms of an agreement between them [emphasis added]
Section 5.4 (1) of the EPCA states:
5.4 (1) Two or more persons who have been granted rights by the province to the same body of water as a source for the production of power and who utilize, or propose to utilize, or to develop and utilize the body of water as a source for the production of power shall enter into an agreement for the purpose of achieving, with respect to the body of water, the policy objective set out in subparagraph 3(b)(i) [emphasis added]
Section 5.5 (3) of the EPCA also states:
5.5.(3) "An agreement established by the public utilities board under subsection (2) is binding on the persons named in the agreement." So therefore, it would appear that since Hydro Quebec is NOT a party to Nalcor's Water Management Agreement, then Hydro Quebec would not be "named in the agreement" and therefore NOT bound by it.
Section 5.7 of the EPCA states:
5.7 A provision of an agreement referred to in section 5.4 or 5.5 (Nalcor's Water Management Agreement) shall not adversely affect a provision of a contract (Hydro's Quebec's 1969 Power Contracts and 2016 Renewal Contract) for the supply of power entered into by a person bound by the agreement and a third party that was entered into before the agreement under section 5.4 or 5.5 was entered into or established, or a renewal of that contract.
3. The Effect. Section 5.7 says, in effect, that the 1969 Upper Churchill and related contracts between Hydro Quebec and CF(L)Co "shall not be adversely affect(ed)" by Nalcor's Water Management Agreement. That is, Hydro Quebec's rights under its earlier 1969 and related contracts take precedence over Nalcor's Water Management Agreement -- actual reference http://www.assembly.nl.ca/legislation/sr/statutes/e05-1.htm#5_2
Furthermore, the record shows that in 2009 Nalcor attempted, but was unsuccessful, in getting Hydro Quebec to become a party to, or to otherwise agree to, its Water Management Agreement. Section 5.5(1) of the EPCA makes it clear that only “persons to whom subsection 5.4(1) applies (and who in turn) fail to enter into an agreement within a reasonable period of time may apply to the public utilities board…” for a water management agreement [emphasis added].
Accordingly, is seems that in 2009 Nalcor itself believed that section 5.4(1) applied to Hydro Quebec since (in 2009) Nalcor/CF(L)Co's attempted (but failed) to get Hydro Quebec to be a party to or to otherwise reach an agreement on water management.
If section 5.4(1) applies to Hydro Quebec (as Nalcor must have believed in 2009), then Hydro Quebec must be an entity that has “been granted rights by the province to the same body of water as a source for the production of power and who utilize, or propose to utilize, or to develop and utilize the body of water as a source for the production of power”.
Should then, Hydro Quebec, in future, decide to challenge Nalcor’s position re its Water Management Agreement, wouldn't the fact that Nalcor previously tried to reach agreement with Hydro Quebec (pursuant to EPCA section 5.5 and 5.4) thereby strengthen Hydro Quebec's position that it has rights pursuant to the province 's EPCA (beyond those priority rights already guaranteed by EPCA section 5.7)?
4. Nalcor's position. If so, how can Nalcor now say, in its News Release dated October 22, 2012 that “ Hydro-Quebec does not control the Churchill River…”, when the very LEGAL basis for Nalcor's application (and the subsequent granting of an agreement by the PUB) seems to have been grounded both in Nalcor’s/CF(L)Co’s previously failed attempt to obtain a water management agreement with Hydro Quebec and in existing provincial legislation itself [EPCA sections 5.5(1) and 5.4(1)] --- sections of the EPCA that provided grounds for Nalcor's application to have gone before the PUB in the first place and that could also have been granted only by virtue of the PUB itself having accepted that the conditions specified in EPCA sections 5.5(1) and 5.4(1) had already been met?
Scroll down and see HQ's 2009 letter to our PUB, and links to a number of the above-referenced documents.
Please read carefully Quebec Hydro's position re the Nalcor/CF(L)Co Water Management Agreement, especially page 2 of Quebec Hydro's reply, and you will see that (when read in conjunction with the NL Electrical Power Control Act), that Quebec Hydro's pre-existing Upper Churchill contractual rights appear to take precedence over Nalcor/CF(L)Co's Water Management Agreement.
ALSO: ---- Note Brad Cabana's post linked to The Telegram's editorial about Nalcor's Water Management Agreement:-
Brad Cabana- October 27, 2012 at 14:53:52
The piece missing to finish your line of thinking is the 1999 Shareholder's Agreement between CFLCO and Hydro Quebec which gives Hydro Quebec the right to veto any change to the Upper Churchill contract that CFLCO might attempt to do. Its sections 3.4.6 and 3.4.7. You can thank then head of NL Hydro Dean MacDonald for that one. So, in other words, if Hydro Quebec decides to take every MW of extra power that extra water in the dam produces there is not a thing we can do about it. In many ways, the Shareholders Agreement, inked 30 years after the Upper Chuchill deal was done, is actually far worse than the UC agreement. Sadly.
SO? Are we going BILLIONS in debt to build Muskrat Falls, only to find out that Hydro Quebec still controls the water flow from the Upper Churchill reservoir and in any event, has first right of access to any additional power produced?
http://www.thetelegram.com/News/Local/2012-10-28/article-3108837/Nalcor-tries-to-allay-water-management-legal-questions/1#Comments
http://ia600406.us.archive.org/30/items/PowerContractBetweenTheQuebecHydro-electricCorporationAndChurchill/1969_ChurchillFallsContract.pdf
http://rocksolidpolitics.blogspot.ca/search/label/1999%20Shareholder%27s%20Agreement
"Water rights are crucial" , The Telegram, Nov. 5, 2012
Also:
Listen to CBC interview with Nalcor's Gilbert Bennett, lawyers Bern Coffey and Dennis Browne (and reply from Hydro Quebec)
http://www.cbc.ca/player/Radio/Local+Shows/Maritimes/Information+Morning+-+NS/ID/2299040257/
Seems Hydro Quebec has quite an arsenal of legislative/contractual and other agreements in their favour:
- 1) ........ the Power Contract between Hydro-Quebec and CF(L)Co dated May 12, 1969 ("1969 Power Contract");
- 2)......... the Renewed Power Contract between Hydro-Quebec and CF(L)Co, which will come into force automatically (2016) on expiry of the 1969 Power Contract;
- 3).......... the Guaranteed Winter Availability Contract between Hydro-Quebec and CF(L)Co, dated November 1, 1998;
- 4).......... the 1999 Shareholders Agreement between HQ and CF(L)Co [which gives Hydro Quebec a veto over significant CF(L)Co Board decisions];
- 5).......... the province of NL's own Electrical Power Control Act (sections 5.4, 5.5 and 5.7); and
- 6) ......... Nalcor's Water Management Agreement itself (which HQ has refused to be party to)
1. Reasonable Action. Any "reasonable" person would either, first, get approval from Quebec Hydro, or two, get a court decision on whether or not Nalcor (through its Water Management Agreement) or whether it is Hydro Quebec, that has the over-riding authority to determine the amount of water in and flowing from the Churchill Reservoir.
A reasonable person would do so BEFORE locking the province's ratepayers into a $10-15 billion project that might first and foremost (and by law) have to be operated in a way that is under the control of Hydro Quebec --- and which existing contracts seem to say that where any additional power is produced that such additional power has to be for Hydro Quebec's benefit FIRST (and perhaps even solely), for their benefit.
2. Legal Basis. The Water Management Agreement between Nalcor and CF(L)Co has been established pursuant to section 5.5 of the province's Electrical Power Control Act (EPCA) ----- PUB Order NO. P. U. 8(2010), refers (excerpt below):
"WHEREAS on November 10, 2009 Nalcor Energy ("Nalcor") filed an application, pursuant to section 5.5 of the EPCA, for an order of the Board of Commissioners of Public Utilities (the "Board") establishing the terms of a water management agreement between Nalcor and Churchill Falls (Labrador) Corporation Limited ["CF(L)Co"] with respect to the Churchill River (the "Application")";
Section 5.5 of the EPCA, states (in part):
5.5 (1) Where 2 or more persons to whom subsection 5.4(1) applies fail to enter into an agreement within a reasonable time, one or more of them may apply to the public utilities board to establish the terms of an agreement between them [emphasis added]
Section 5.4 (1) of the EPCA states:
5.4 (1) Two or more persons who have been granted rights by the province to the same body of water as a source for the production of power and who utilize, or propose to utilize, or to develop and utilize the body of water as a source for the production of power shall enter into an agreement for the purpose of achieving, with respect to the body of water, the policy objective set out in subparagraph 3(b)(i) [emphasis added]
Section 5.5 (3) of the EPCA also states:
5.5.(3) "An agreement established by the public utilities board under subsection (2) is binding on the persons named in the agreement." So therefore, it would appear that since Hydro Quebec is NOT a party to Nalcor's Water Management Agreement, then Hydro Quebec would not be "named in the agreement" and therefore NOT bound by it.
Section 5.7 of the EPCA states:
5.7 A provision of an agreement referred to in section 5.4 or 5.5 (Nalcor's Water Management Agreement) shall not adversely affect a provision of a contract (Hydro's Quebec's 1969 Power Contracts and 2016 Renewal Contract) for the supply of power entered into by a person bound by the agreement and a third party that was entered into before the agreement under section 5.4 or 5.5 was entered into or established, or a renewal of that contract.
3. The Effect. Section 5.7 says, in effect, that the 1969 Upper Churchill and related contracts between Hydro Quebec and CF(L)Co "shall not be adversely affect(ed)" by Nalcor's Water Management Agreement. That is, Hydro Quebec's rights under its earlier 1969 and related contracts take precedence over Nalcor's Water Management Agreement -- actual reference http://www.assembly.nl.ca/legislation/sr/statutes/e05-1.htm#5_2
Furthermore, the record shows that in 2009 Nalcor attempted, but was unsuccessful, in getting Hydro Quebec to become a party to, or to otherwise agree to, its Water Management Agreement. Section 5.5(1) of the EPCA makes it clear that only “persons to whom subsection 5.4(1) applies (and who in turn) fail to enter into an agreement within a reasonable period of time may apply to the public utilities board…” for a water management agreement [emphasis added].
Accordingly, is seems that in 2009 Nalcor itself believed that section 5.4(1) applied to Hydro Quebec since (in 2009) Nalcor/CF(L)Co's attempted (but failed) to get Hydro Quebec to be a party to or to otherwise reach an agreement on water management.
If section 5.4(1) applies to Hydro Quebec (as Nalcor must have believed in 2009), then Hydro Quebec must be an entity that has “been granted rights by the province to the same body of water as a source for the production of power and who utilize, or propose to utilize, or to develop and utilize the body of water as a source for the production of power”.
Should then, Hydro Quebec, in future, decide to challenge Nalcor’s position re its Water Management Agreement, wouldn't the fact that Nalcor previously tried to reach agreement with Hydro Quebec (pursuant to EPCA section 5.5 and 5.4) thereby strengthen Hydro Quebec's position that it has rights pursuant to the province 's EPCA (beyond those priority rights already guaranteed by EPCA section 5.7)?
4. Nalcor's position. If so, how can Nalcor now say, in its News Release dated October 22, 2012 that “ Hydro-Quebec does not control the Churchill River…”, when the very LEGAL basis for Nalcor's application (and the subsequent granting of an agreement by the PUB) seems to have been grounded both in Nalcor’s/CF(L)Co’s previously failed attempt to obtain a water management agreement with Hydro Quebec and in existing provincial legislation itself [EPCA sections 5.5(1) and 5.4(1)] --- sections of the EPCA that provided grounds for Nalcor's application to have gone before the PUB in the first place and that could also have been granted only by virtue of the PUB itself having accepted that the conditions specified in EPCA sections 5.5(1) and 5.4(1) had already been met?
Scroll down and see HQ's 2009 letter to our PUB, and links to a number of the above-referenced documents.
Please read carefully Quebec Hydro's position re the Nalcor/CF(L)Co Water Management Agreement, especially page 2 of Quebec Hydro's reply, and you will see that (when read in conjunction with the NL Electrical Power Control Act), that Quebec Hydro's pre-existing Upper Churchill contractual rights appear to take precedence over Nalcor/CF(L)Co's Water Management Agreement.
ALSO: ---- Note Brad Cabana's post linked to The Telegram's editorial about Nalcor's Water Management Agreement:-
Brad Cabana- October 27, 2012 at 14:53:52
The piece missing to finish your line of thinking is the 1999 Shareholder's Agreement between CFLCO and Hydro Quebec which gives Hydro Quebec the right to veto any change to the Upper Churchill contract that CFLCO might attempt to do. Its sections 3.4.6 and 3.4.7. You can thank then head of NL Hydro Dean MacDonald for that one. So, in other words, if Hydro Quebec decides to take every MW of extra power that extra water in the dam produces there is not a thing we can do about it. In many ways, the Shareholders Agreement, inked 30 years after the Upper Chuchill deal was done, is actually far worse than the UC agreement. Sadly.
SO? Are we going BILLIONS in debt to build Muskrat Falls, only to find out that Hydro Quebec still controls the water flow from the Upper Churchill reservoir and in any event, has first right of access to any additional power produced?
http://www.thetelegram.com/News/Local/2012-10-28/article-3108837/Nalcor-tries-to-allay-water-management-legal-questions/1#Comments
http://ia600406.us.archive.org/30/items/PowerContractBetweenTheQuebecHydro-electricCorporationAndChurchill/1969_ChurchillFallsContract.pdf
http://rocksolidpolitics.blogspot.ca/search/label/1999%20Shareholder%27s%20Agreement
Bern Coffey- November 22, 2012 at 08:44:29 comment to Peter Jackson's Telegram article: Your column begins: "In papers submitted to media, the anti-Muskrat Falls company 2041 Group warns that a key question about water rights on the Churchill River has been left dangling." In the interest of giving The Telegram's readers ready access to at least one of those papers, I reproduce it below. I do so because your column did not mention the focus of this paper, namely that Hydro Quebec's contractual right to receive all its power [and energy] from the Churchill Falls Plant would apparently be adversely affected by Nalcor production for CF(L)Co under the WMA. The paper is titled: "Muskrat Falls, Water Rights, Hydro-Quebec and Legal Certainty." The 1969 Hydro-Quebec Power Contract, the 2016-2041 Renewal Contract, and the Guaranteed Winter Availability Contract (expires 2041) are all agreements for the supply of power by CF(L)Co to Hydro-Quebec from the Churchill Falls Plant using water in the Churchill Falls reservoir. The CF(L)Co-Nalcor water management agreement (the “WMA”) purports to alter Hydro-Quebec's contractual rights by allowing the scheduling of Nalcor production for CF(L)Co. In this context, ‘Nalcor production for CF(L)Co’ means Nalcor generating electricity at Muskrat Falls (or Gull Island) for delivery to Hydro-Quebec in Quebec. While Nalcor maintains the source of the electrons CF(L)Co delivers to Hydro-Quebec doesn’t matter, no one knows whether the courts would support Nalcor’s position. What is known is that in 1984 the Supreme Court of Canada overturned a decision of the Newfoundland Court of Appeal, and in doing so said: "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. As Laskin C.J. said in Central Canada Potash Co. v. Government of Saskatchewan [citation omitted]: ‘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 programmes 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.’" Section 5.7 of the EPCA, 1994 and sections 3.1 and 3.2 of the WMA expressly prohibit any provision in Hydro-Quebec’s Prior Power Contracts from being adversely affected by the WMA. If the courts were to decide Hydro-Quebec has a right to receive its power from the CF Plant, there could be no ‘Nalcor production for CF(L)Co’ delivered to Hydro-Quebec. Under the WMA regime, without ‘Nalcor production for CF(L)Co’ there can be no 'CF(L)Co production for Nalcor.' And without 'Nalcor production for CF(L)Co' and 'CF(L)Co production for Nalcor,' the WMA can't be implemented. Where will things stand if Hydro-Quebec takes the matter to court and the result is that Nalcor cannot implement a working WMA? Nalcor’s Pre-Filed Evidence in the 2009 Water Management Agreement Application to the PUB provides the answer. In outlining the major problems associated with producing power and energy on the lower Churchill River without a working WMA, Nalcor said: “In many months, the lower Churchill facilities [Muskrat Falls and Gull Island] would have insufficient water for production requirements during periods of reduced production [upstream] at Churchill Falls.” [Pre-Filed Evidence: page 13, lines 16-18] Based on the data and scenarios in Nalcor’s own Pre-Filed Evidence, without a working WMA Nalcor would be limited to approximately 175 MW of continuous delivery in a long-term power purchase agreement for Muskrat Falls. This is not to say Nalcor could not advance legal argument(s) to support its position should Hydro-Quebec challenge implementation of the WMA. The point is simply that the outcome of any such legal proceedings is far from certain. Billions of dollars are at stake. Legal certainty is required, particularly in light of Hydro-Quebec’s past success in defending its power contract rights. Nalcor should now either reach an agreement with Hydro-Quebec or have the Courts definitively determine the matter. Otherwise, Hydro-Quebec may in future institute legal proceedings, the outcome of which could be disastrous for Newfoundland and Labrador. Bern Coffey
