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Supreme Court to rule on Quebec-N.L. feud over Churchill Falls hydro riches

The Supreme Court of Canada in Ottawa on Tuesday, July 10, 2012.
The Supreme Court of Canada in Ottawa on Tuesday, July 10, 2012. Sean Kilpatrick / The Canadian Press

The Supreme Court of Canada will deliver a decision Friday in one of Canada’s bitterest interprovincial feuds – the notorious 1969 Churchill Falls hydro deal between Quebec and Newfoundland and Labrador.

Profits from the hydroelectric dam and power station in Labrador have been in dispute for decades, and a ruling in Newfoundland and Labrador’s favour could mean billions of dollars to ease the cash-strapped province’s considerable financial burdens.

The decision will determine whether Hydro-Quebec has a “good faith” obligation to re-negotiate the deal, based on unforeseeable changes in electricity markets over time.

READ MORE: Supreme Court to hear bid to reopen Churchill Falls hydro station

Terms of the contract between the two provinces have delivered more than $27.5 billion to Hydro-Quebec and around $2 billion to Newfoundland and Labrador.

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At the time of signing, Hydro-Quebec agreed to buy Churchill Falls power at a fixed rate that was set to decrease over time, allowing the province sell the dam’s power for massive profits.

But the division of profits has sparked a bitter feud between the two provinces.

The deal is set to expire in 2041, and it’s been a thorn in Newfoundland and Labrador’s side for decades. Quebec has maintained that the costs and risks were clear when the deal was signed.

READ MORE: Newfoundland to appeal Churchill Falls ruling

Doug Mitchell, lawyer for the easternmost province, argued before the Supreme Court last year that negotiators almost 50 years ago couldn’t have predicted such drastic changes in the markets, or such significant profits.

It’s the latest legal attempt by the Atlantic province to reopen what it sees as an unfair deal, in a decades-long series of court challenges that have, so far, been unsuccessful.

Crown corporation Nalcor Energy lost its case before the Quebec Superior Court in 2010, when it argued that Hydro-Quebec had a duty to renegotiate terms because the massive profits were unforeseeable in 1969.

The Quebec Court of Appeal upheld the trial decision, finding Quebec was under no obligation to renegotiate, and ruling that the “good faith” principles did not apply because the deal was “profitable” for Newfoundland and Labrador.

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While courts have typically sided with Quebec, a win would mean billions for Newfoundland and Labrador as the province faces mounting debt and paying the costs of the wildly over-budget Muskrat Falls hydroelectric project.