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Thursday 4 June 2015


This week the Minister of Natural Resources told the House of Assembly there is no relationship between the ongoing Hydro-Québec lawsuit and Muskrat Falls.

"Obviously, there is a court case going on”, Dally said, “but the court case itself is with respect to the interpretation…of the 1969 power contract. The renewal of that contract and the agreement with Hydro-Québec as to how the water will flow, how the power will flow, whether it will be continuous or interrupted — that is exactly what the court case is all about. It is not about water rights."

When Derrick Dalley speaks you can be pretty certain he is wrong; though, most often, he is just unintelligible.

No other energy Minister has ever been as comfortably uninformed, effortlessly ignorant, contentedly lacking knowledge, or happily short on logic and common sense. 

The suggestion the legal case, now winding its way through the Quebec Superior Court, will have no impact on the Water Management Agreement is simply disingenuous – or evidence of a lack of anything else to say – besides the truth.

Some explanation will help you understand the issue.

Nalcor told the PUB, during Hearings on the Water Management Agreement: “Upon renewal, HQ will become entitled to receive Continuous Energy. …as a result, HQ will be entitled to essentially equal amounts of energy during each month, after renewal”. (underline added)

Nalcor hopes to access power in excess of the amount specifically committed under the Upper Churchill Contract.

The Upper Churchill Renewal Agreement certainly defines “Continuous Energy” in the context of a calendar day/month/year. But, Article III of the Agreement, dealing with “Recapture” (“recall” power), caps such recall. Section 5.4 sets the “maximum withholding” to 300,000 kilowatts (300 MW) per year.

In addition, the reader is reminded that, under the Administration of Premier Frank Moores, the Government’s attempt to increase the Recall provision from 300 MWs to 800 MW failed in both the Newfoundland Supreme Court and Quebec Superior Court; decisions later upheld on Appeal to the Supreme Court of Canada.

The 1969 Contract also awards Hydro Quebec the “energy and capacity” of the Upper Churchill.  Nalcor has never clarified the legal standing of Section 5.2 of the Renewal Agreement which states in part “…whenever additional capacity can…be made available, such capacity shall also be available to Hydro Quebec on request”.  The Crown Corporation has never said where its escape hatch is located for HQ’s seemingly broad legal entitlement.

Nalcor was well aware of that legal phraseology long before it counselled the Government to sanction Muskrat. Today, more than two years later, legal clarity on that issue continues to elude all concerned.

If Hydro Quebec’s right to purchase “virtually all” the “energy and capacity” of the Upper Churchill (except for the Recall and Twin Falls obligations) is upheld by the Court, it will mean a defeat for the Water Management Agreement; the connection with Muskrat Falls is unmistakable…for everyone, except Dalley.

Related Reading:


Let’s look at the issue from a different angle.

Under the WMA, Nalcor claims the right to “bank” and retrieve energy, essentially using the Upper Churchill’s Smallwood Reservoir as Muskrat’s reservoir.

The Water Management Agreement seeks to give CFLCo the right to take energy from the Upper Churchill during peak demand periods and replace it from the Muskrat Falls facility, when Nalcor doesn’t need the power.

In theory, it is a sound idea. It maximizes the power potential of the Churchill River.
However, the big question is whether CFLCo has the legal right to enforce the WMA or if the Quebec Superior Court will make it inoperable.

Only a fool would contend the current legal dispute is ‘slam dunk’ for Nalcor.

The legal challenge contains all the political machinations akin to that of the Mike Duffy trial; in both cases, the governments prefer they got heard well after the election in case the public wakes up to the implications each will lay bare.

And make no mistake about it --- the public deserves to be aware of the implications of a failure of the WMA.

This is one of them:

If the WMA is disallowed, Muskrat Falls, which has a rated capacity of 824 MW, may produce as low as 175 MW due to a lack of water from the Upper.  It is just enough to supply the Nova Scotia Block (167 MW).  That figure is based upon Nalcor’s own testimony to the PUB.

While Nalcor will tell you that Muskrat will generate just as much power whether the WMA works or not, it doesn’t tell you the power may not be available when it is needed. 

Nalcor doesn’t tell you that HQ’s scheduling issues, that is, the time it takes for water released from the Smallwood reservoir to arrive at Muskrat Falls, together with the fact that the Muskrat reservoir is too small  to provide much reserve water, taken together, conspires to make Muskrat (without a viable WMA) a near useless construction project.

Possibly love for Nalcor will help people overlook, during a forthcoming winter, they can have heat and a shower at 3AM (or whenever the water flows occur at Muskrat), but not at 7AM (during peak demand), when they get out of bed.

Alternatively, Nalcor can increase the power generated from Holyrood…sound’s fine as long as you know you are paying for that shower twice!

You should have been warned of at least that much by Derrick Dalley.

That Quebec has been a greedy and avaricious neighbour is proven.  Then, too, the Smallwood Administration was an incompetent Government.  

Even after Smallwood signed off on the water rights giveaway, he had the audacity to proclaim during the official opening of the Upper Churchill:

“This is our land. This is our province. This is our river. This is our waterfall…”

Bill Rowe, a Cabinet Minister under Smallwood, writing in his book “The Premiers Joey and Frank” had to this say about Joey's proclamation: considering Quebec received as much benefit as if “…they had owned the resource outright, poor Joey’s rant would be perceived as the biggest piece of cockeyed bullshit ever orated…”

Derrick Dalley continues the Danny Williams version of Joey’s oratorical manure.

The Danny Williams crowd, including Cathy Dunderdale and Ed Martin, committed billions of dollars to Muskrat Falls.

It was an action of historic stupidity and recklessness, having failed, among other things to, at least, ensure ahead of time that our legal position regarding the WMA is unassailable.
Nalcor was advised by the 2041 Group, especially by lawyers Bern Coffey, Dennis Brown, and Cabot Martin who frequently spoke on the Group’s behalf, that it would be wise to halt the process of sanction.

Bern Coffey told the media: “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…(t)he point is simply that the outcome of any such legal proceedings is far from certain.”

The 2041 Group’s advice did not suit Nalcor’s preferred narrative.

Even at this late date, Derrick Dalley, the Minister of Natural Resources, cannot stand in the House of Assembly and explain those issues or justify Nalcor continued spending on Muskrat Falls. He seems incapable of grasping the implications of what is about to unfold in a Quebec Superior Court Room. 

"Obviously, there is a court case going on”, stated Minister Derrick Dalley, in the House of Assembly.

And that’s all Derrick Dalley knows.