Nfld. & Labrador

Q&A: Supreme Court of Canada's Churchill Falls review — what it means, next steps

Ron Penney, a lawyer and also N.L.'s former deputy minister of justice and city manager for St. John's, breaks down what the Supreme Court of Canada review of the Churchill Falls deal means, its potential and next steps.

'Potential to be a tremendous game-changer,' says Ron Penney, N.L.'s former deputy minister of justice

Lawyer Ron Penney says the Supreme Court of Canada's review of the Churchill Falls is 'a real important ray of hope here.' (Paula Gale/CBC)

The Supreme Court of Canada has said it will review the 1969 Churchill Falls energy deal that has been highly profitable for Hydro-Quebec — but much less so for Newfoundland and Labrador.

The contract, which had a 65-year term, set a fixed price for the energy that would decrease in stages over time. The project has generated more than $26 billion for Hydro-Quebec, compared to about $2 billion for Newfoundland and Labrador.

Lawyer Ron Penney has followed the legal saga that has lasted for years between the two sides. He is a former deputy minister of justice for Newfoundland and Labrador and city manager for the City of St. John's. 

He spoke with Krissy Holmes of CBC Radio's St. John's Morning Show to give his take on the latest development. Here are edited excerpts from the interview. 

So what has prompted this review [by the Supreme Court of Canada]?

I suspect it may be as a result of really good work done by Jim Feehan and Melvin Baker at Memorial University. They reviewed the history behind the contract and pointed out how unfair, especially the renewal provision, is.

How significant is it that the Supreme Court of Canada is going to be reviewing this?

We shouldn't count our chickens before they hatch, but this has the real potential to be a tremendous game changer because — if we are successful in the Supreme Court of Canada and [it] decides that we have been treated unfairly all these years — then the whole contract would have to be renegotiated. The Supreme Court of Canada won't renegotiate the contract, but it improves our bargaining position immensely.

Newfoundland and Labrador Crown-owned Nalcor Energy is defending its screening process for contractors working on the Lower Churchill hydro project. (CBC)

Once it gets to the Supreme Court level, what will happen from there?

What will happen is hopefully, it may be heard as early as this fall. Both sides will prepare their written arguments and then there will be oral arguments before the Supreme Court of Canada ... so we might have a final decision in 2018.

Can you outline some of the challenges for us?

Well, we're at the Supreme Court of Canada, there's no other procedural delays that can happen.  What it does, though, is it introduces for the first time — in terms of Quebec — some uncertainty in terms of how they may view their position. So there may well be an opening now over in the next year-and-a-half for fruitful negotiations to take place. Because, for the first time, they may be uncertain what their legal position is. It could conceivably be a tremendous game-changer.  

What's your reaction to the review?

I was very pleasantly surprised and over the moon yesterday. They agree to hear very few matters, perhaps 70 or 80 matters a year ... so obviously the Supreme Court of Canada feels there is a really important legal issue here and if they decide that we have been treated unfairly, then it changes the water on the beans tremendously. And it means that, for the first time, we have a really strong bargaining position.

Quebec Premier Philippe Couillard had reportedly wanted to bury the hatchet with Newfoundland and Labrador regarding the Upper Churchill agreement. However, the saga is heading to the country's highest court. (CBC)

Do you know why the SCOC got involved — why it may feel we've been treated unfairly?

I don't really know ... there is a provision in the Quebec civil code that people who deal with one another in terms of contracts have to do so fairly. And the legal issue is whether or not we have been treated fairly ... particularly, the renewal contract has just kicked in, and that's a 25 year contract. And as I said, the price goes down and inequity gets worse and worse ... so even if we can change on an ongoing basis, we're talking about billions and billions of dollars. It could really fundamentally change the financial situation facing the province. It's that big.

I understand that people in the public are going to be able to follow this as well.

In this case here, the hearing will be webcast live. Now the problem is, most of the arguments will probably be in French. But interested Newfoundlanders will be able to follow it, and I'll be one for sure.

Is it possible that, if we lose in the end, the province will be on the hook for Quebec's legal expenses?

Yes, that's possible. But we're talking about tens of millions as compared to tens of billions. So I certainly support the effort, no question about that.

Should we hold out hope this time around?

Oh yes, because clearly the Supreme Court of Canada thinks there's an important legal issue. So as I say, we shouldn't start spending the money or stop our efforts to try and control our spending in the province, but there's a real important ray of hope here.

With files from St. John's Morning Show and The Canadian Press