ST. JOHN'S, N.L. - Hydro-Quebec's court challenge involving the Upper Churchill power station won't affect the Muskrat Falls project downstream, says Newfoundland and Labrador's Crown-owned utility.
But those assurances did little to quell growing questions about the $7.7-billion Muskrat Falls development on Labrador's Churchill River — and a call by a group of lawyers and businessmen to halt related spending — as legal disputes mount.
Nalcor Energy vice-president Gilbert Bennett, who is in charge of Muskrat Falls, said Friday the Hydro-Quebec case won't impact the project's generation of up to 824 megawatts of power as planned.
"We don't see a relationship between this action and water management," he told reporters in St. John's. "It speaks to interpretation of the (1969 Upper Churchill) power contract."
Bennett said he can't discuss specifics of the legal challenge to be defended by the Churchill Falls (Labrador) Corp., which operates the Upper Churchill generating station upstream.
But he said Nalcor anticipates no impact on Muskrat Falls operations or the price of that power. No delays are anticipated as construction near Happy Valley-Goose Bay forges ahead, Bennett added.
His comments come after Premier Kathy Dunderdale on Tuesday blasted what she called Hydro-Quebec's "arrogant" and "desperate" legal attempt to thwart the Muskrat Falls development.
The plan to bring power from Labrador to Newfoundland and then Nova Scotia using subsea cables is a joint venture between Nalcor and Nova Scotia private utility Emera (TSX:EMA).
Earlier Friday, Churchill Falls (Labrador) Corp. said it has accurately interpreted its contract with Hydro-Quebec, which has filed a motion asking a court to affirm its right to buy virtually all of the power from the Upper Churchill dam.
The legal challenge involves the government-owned utility's right to access energy from the Upper Churchill site based on a deal signed in 1969. The agreement to ship power from Labrador to Quebec for sale elsewhere did not reflect rising energy values over time. It has reaped about $20 billion in profits for Quebec, versus $1 billion for Newfoundland and Labrador, causing ongoing friction between the two provinces.
Hydro-Quebec in the most recent legal tangle takes issue with assertions by the Churchill Falls (Labrador) Corp. that from 2016 — when the Upper Churchill power contract is renewed — until 2041 when it expires, the utility in Quebec would be entitled to monthly allotments of energy.
The Churchill Falls (Labrador) Corp. says after reviewing the contract, its position is unchanged. It says it will continue to fulfil its obligations and will not comment further while the matter is before the courts.
Earlier this week, Dunderdale said she has every confidence the court challenge will fail.
Bennett said there's a political context to the case in that it has raised questions and fuelled scrutiny of a project that has long been questioned by opposition parties and other skeptics.
St. John's lawyer Dennis Browne, a member of the 2041 Group of lawyers and businessmen representing Muskrat Falls critics of all political stripes, said Friday construction should stop pending an independent review.
"The Newfoundland government must acknowledge the obvious: the project's fundamentals have changed, and not for the better. The risks are immense," he told a news conference.
Old assumptions about soaring oil prices play havoc with the development's business case, Browne said in an interview.
"Ultimately the financial markets will decide this project," he said, adding that federal backing for a loan guarantee that would shave more than $1 billion off borrowing costs is also at stake. Browne and other critics are asking the extent to which uncertainty about Emera's commitment to the project, combined with legal questions, could jeopardize Ottawa's support.
Emera has until July 2014 to opt out of the Maritime Link portion of the project, but Nova Scotia Premier Darrell Dexter has repeatedly declared his province's support for Muskrat Falls.
The federal government is not involved in the Hydro-Quebec legal challenge and won't comment on a matter before the courts, says an emailed response from Paul Duchesne, a spokesman for Natural Resources Canada.
"The government will continue to perform its due diligence and work with Emera, Nalcor Energy and the provinces of Newfoundland and Labrador and Nova Scotia as they move forward with developing the Lower Churchill River projects," he said.
"We will continue to ensure that the loan guarantee to be provided is financially responsible to Canadian taxpayers."