The Churchill Falls hydroelectric project under construction - file photo

The Churchill Falls hydroelectric project under construction - file photo

Supreme Court sides with Hydro-Quebec in historic Churchill Falls dispute

It is one of Canada’s bitterest interprovincial feuds, the notorious 1969 Churchill Falls hydro deal between Quebec and Newfoundland and Labrador

The Supreme Court of Canada says there is no legal obligation to reopen the 1969 Churchill Falls energy deal that has been highly profitable for Hydro-Quebec but much less so for Newfoundland and Labrador.

In a 7-1 ruling today, the high court says it cannot force the parties to renegotiate the contract even though the arrangement has turned out to be unexpectedly lucrative for the Quebec utility.

Under the deal signed decades ago, Hydro-Quebec agreed to buy almost all the energy generated by the power plant on the Churchill River in Labrador.

The contract, covering 65 years, set a fixed price for the energy that would decrease over time. It’s earned more than $27.5 billion for Hydro-Quebec to date and about $2 billion for Newfoundland and Labrador.

Churchill Falls (Labrador) Corporation Ltd. went to Quebec Superior Court in 2010, arguing unsuccessfully that the sizable profits from electricity were unforeseen in 1969 and that Hydro-Quebec had a duty to renegotiate the contract.

An appeal court affirmed the ruling but the Supreme Court agreed to hear the corporation’s case.

In its ruling, the high court says that in Quebec civil law there is no legal basis for the claim advanced by the corporation, known as CFLCo, part of Newfoundland and Labrador Hydro.

A majority of the Supreme Court says CFLCo was seeking to undo certain aspects of the contract while keeping the ones that suit it. In effect, it was asking Hydro-Quebec to give up the benefits it obtained in exchange for the sacrifices it made to get the massive project up and running — a situation from which CFLCo has been benefiting since 1969 and continues to benefit today.

“Neither good faith nor equity justifies granting these requests,” the court says.

“In the final analysis, CFLCo has not provided any compelling factual or legal basis for the courts to reshape the contractual relationship it has had with Hydro-Quebec for the last 50 years.”

Related: Supreme Court of Canada won’t hear B.C. veterans’ lawsuit on pensions

Related: Supreme Court sides with Rogers in illegal movie downloading case

The landmark decision could have a profound influence on relations between Quebec and Newfoundland and Labrador, given long-standing tensions over the historic energy deal. The project, championed in the early days by then-Newfoundland premier Joey Smallwood, has long been a sore point.

The Churchill River in Labrador drops more than 300 metres over a stretch of less than 32 kilometres, making the falls one of the world’s most significant sources of hydroelectric power. A massive underground power station, carved out of solid granite, produces over 34 billion kilowatt-hours of energy annually.

In its submission to the Supreme Court, CFLCo said the energy market and regulatory landscape in 1969 were vastly different than they are today: energy was a public good with no real market value, and exports were simply a means of disposing of surpluses and required legislative authorization. Hydro-Quebec was a public service provider, required by law to sell to electricity to Quebec consumers at a low price.

Over the decades, everything has changed, CFLCo argued. Energy has become a supply-and-demand commodity with lucrative export markets.

In turn, Hydro-Quebec’s mandate evolved and the utility has made billions of dollars selling power to Quebecers and billions more exporting to previously non-existent markets at 20 to 40 times the contract price, CFLCo told the court. Meantime, the corporation remains stuck in 1969, with a fixed, declining electricity price.

Hydro-Quebec argued that under the contract it assumed the risk associated with any fluctuations in the market value of energy, which made financing the Churchill Falls project possible. In return, Hydro-Quebec had assurance that the price set in the contract would provide the utility, for the full term, with stable supply and protection against inflation.

In reality, CFLCo was seeking a new contractual balance bearing no relation to the original one struck by the parties — redress that falls outside the role and function of the courts, Hydro-Quebec said.

Though the project began generating power in the early 1970s, the contract formally took effect in 1976 with a 40-year term and an automatic 25-year extension — meaning it expires in September 2041.

In its ruling, the Supreme Court notes the terms of the contract will see CFLCo begin operating a plant worth more than $20 billion for its own benefit.

The Canadian Press

Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

People skate on a lake in a city park in Montreal, Sunday, January 10, 2021. THE CANADIAN PRESS/Graham Hughes
The end of hugs: How COVID-19 has changed daily life a year after Canada’s first case

Today marks the one year anniversary of COVID-19 landing in Canada

SARS-CoV-2 virus particles, which causes COVID-19, emerge from the surface of cells isolated from a patient in the U.S. and cultured in a lab in a 2020 electron microscope image. THE CANADIAN PRESS/AP-HO, National Institute of Allergy and Infectious Diseases - Rocky Mountain Laboratories
Alberta adds 463 new COVID-19 cases on Sunday

The central zone has 818 active cases

As of Friday, Alberta has under 10,000 active COVID-19 cases. (Image courtesy CDC)
Alberta identifies 573 new COVID-19 cases, 13 deaths on Saturday

There are currently 9,727 active cases of the virus in the province

As of Friday, Alberta has under 10,000 active COVID-19 cases. (Image courtesy CDC)
Three new COVID-19 deaths in Central zone, Alberta under 10,000 active cases

The Central zone sits at 849 active cases, with 52 people in hospital and 10 in the ICU.

Black Press File Photo
Maskwacis RCMP lay charges for attempted murder, kidnapping, and flight from police

Female victim remains in hospital in serious condition.

Terrance Josephson of the Princeton Posse, at left, and Tyson Conroy of the Summerland Steam clash during a Junior B hockey game at the Summerland Arena in the early spring of 2020. (John Arendt - Summerland Review)
QUIZ: How much do you know about hockey?

Test your knowledge of Canada’s national winter sport

A woman injects herself with crack cocaine at a supervised consumption site Friday, Jan. 22, 2021 in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Drug users at greater risk of dying as services scale back in second wave of COVID-19

It pins the blame largely on a lack of supports, a corrupted drug supply

RCMP. (Phil McLachlan - Black Press Media)
Blackfalds RCMP investigate fatal collision

Preliminary investigation revealed a south bound pickup truck collided with an eastbound car

Jennifer Cochrane, a Public Health Nurse with Prairie Mountain Health in Virden, administers the COVID-19 vaccine to Robert Farquhar with Westman Regional Laboratory, during the first day of immunizations at the Brandon COVID-19 vaccination supersite in Brandon, Man., on Monday, January 18, 2021. THE CANADIAN PRESS/Tim Smith - POOL
Top doctor urges Canadians to keep up with COVID measures, even as vaccines roll out

More than 776,606 vaccines have been administered so far

Dr. Jerome Leis and Dr. Lynfa Stroud are pictured at Sunnybrook Hospital in Toronto on Thursday, January 21, 2021.THE CANADIAN PRESS/Frank Gunn
‘It wasn’t called COVID at the time:’ One year since Canada’s first COVID-19 case

The 56-year-old man was admitted to Toronto’s Sunnybrook Health Sciences Centre

FILE - In this Feb. 14, 2017, file photo, Oklahoma State Rep. Justin Humphrey prepares to speak at the State Capitol in Oklahoma City. A mythical, ape-like creature that has captured the imagination of adventurers for decades has now become the target of Rep. Justin Humphrey. Humphrey, a Republican House member has introduced a bill that would create a Bigfoot hunting season, He says issuing a state hunting license and tag could help boost tourism. (Steve Gooch/The Oklahoman via AP, File)
Oklahoma lawmaker proposes ‘Bigfoot’ hunting season

A Republican House member has introduced a bill that would create a Bigfoot hunting season

FILE - In this Nov. 20, 2017, file photo, Larry King attends the 45th International Emmy Awards at the New York Hilton, in New York. Former CNN talk show host King has been hospitalized with COVID-19 for more than a week, the news channel reported Saturday, Jan. 2, 2021. CNN reported the 87-year-old King contracted the coronavirus and was undergoing treatment at Cedars-Sinai Medical Center in Los Angeles. (Photo by Andy Kropa/Invision/AP, File)
Larry King, broadcasting giant for half-century, dies at 87

King conducted an estimated 50,000 on-air interviews

In this Dec. 18, 2020 photo, pipes to be used for the Keystone XL pipeline are stored in a field near Dorchester, Neb.  THE CANADIAN PRESS/AP-Chris Machian /Omaha World-Herald via AP
‘Gut punch’: Alberta Premier Jason Kenney blasts Biden on revoked Keystone XL permit

Kenney said he was upset the U.S. wouldn’t consult with Canada first before acting

Joe Biden, then the U.S. vice-president, and Prime Minister Justin Trudeau take their seats at the start of the First Ministers and National Indigenous Leaders meeting in Ottawa, Friday, Dec. 9, 2016. THE CANADIAN PRESS/Adrian Wyld
Trudeau, Biden to talk today as death of Keystone XL reverberates in Canada

President Joe Biden opposed the Keystone XL expansion as vice-president under Barack Obama

Most Read