N.B. Premier Shawn Graham is threatening to sue the federal government over delays in the refurbishment of the Point Lepreau nuclear reactor. (CBC)

N.B. Premier Shawn Graham is again threatening to take legal action against the federal government if it doesn't cover the cost overruns of the $1.4-billion refurbishment of the Point Lepreau nuclear power plant.

Atomic Energy of Canada Ltd. has already announced the project is 16 months behind schedule and that the nuclear reactor, Atlantic Canada's only one, is not expected to come back on line until February 2011.

CBC News reported last week that the Point Lepreau reactor is again running into problems, this time with the installation of the calandria tubes. The tubes contain smaller pressure tubes that hold the uranium bundles that fuel the reactor.

An AECL spokesman said the problem won't further delay the project because enough of a buffer was built into the new timeline to account for any additional problems.

However, Graham told reporters on Monday that AECL is not living up to its contract and that could result in a court fight.

"We want to continue dialoguing with the government of Canada, which is an extension of AECL. This is a government of Canada responsibility," Graham said.

"But I've been very clear if we can not come to an end result that benefits the ratepayers of New Brunswick, then we will commence legal action, and we feel strongly that we have a solid case to stand on."

Only "eight or nine" of the 380 new calandria tubes have been installed, according to AECL.

The work started nearly three weeks ago, and only about five weeks have been set aside for this phase of the project.

The problem is that one of the calandria tubes did not fit properly. The engineers have since decided to skip over that problem tube and come back to it later to keep the job moving, AECL said.

Feds will only pay contract costs

It has been estimated that NB Power will have to pay $1 million a day to purchase replacement power while the reactor is not in service.

Graham has twice written to Prime Minister Stephen Harper insisting that New Brunswick should not be left paying for any new costs associated with the refurbishment. Harper has said the federal government will only pay what it is obligated under the existing agreements.

Energy Minister Jack Keir said in October that the New Brunswick government would consider legal action to recoup cost overruns associated with the world's first Candu-6 refurbishment project.

When the former Progressive Conservative government pushed ahead with the project in 2005, the province renegotiated a series of retubing and refurbishment contracts with AECL.

The renegotiated contracts included stiffer penalties on AECL if the project was not completed on time. NB Power also took out insurance in case of any setbacks at the reactor.