This week the Minister of Natural
Resources told the House of Assembly there is no relationship between the
ongoing Hydro-Québec lawsuit and Muskrat Falls.

“Obviously, there is a court case
going on”, Dally said, “but the court case itself is with respect to the
interpretation…of the 1969 power contract. The renewal of that contract and the
agreement with Hydro-Québec as to how the water will flow, how the power
will flow, whether it will be continuous or interrupted — that is
exactly what the court case is all about. It is not about water

When Derrick Dalley speaks you can be pretty
certain he is wrong; though, most often, he is just unintelligible.

No other energy Minister has ever been as
comfortably uninformed, effortlessly ignorant, contentedly lacking knowledge, or
happily short on logic and common sense. 

The suggestion the legal case, now
winding its way through the Quebec Superior Court, will have no impact on the
Water Management Agreement is simply disingenuous – or evidence of a lack of
anything else to say – besides the truth.

Some explanation will help you understand
the issue.

Nalcor told the
PUB, during Hearings on the Water Management Agreement: “Upon renewal, HQ will
become entitled to receive Continuous Energy. …as a result, HQ will be entitled
to essentially equal amounts of energy during each month, after renewal”.
(underline added)

Nalcor hopes to
access power in excess of the amount specifically committed under the Upper
Churchill Contract.

The Upper
Churchill Renewal Agreement certainly defines “Continuous Energy” in the
context of a calendar day/month/year. But, Article III of the Agreement,
dealing with “Recapture” (“recall” power), caps such recall. Section 5.4 sets the
“maximum withholding” to 300,000 kilowatts (300 MW) per year.

In addition, the
reader is reminded that, under the Administration of Premier Frank Moores, the
Government’s attempt to increase the Recall provision from 300 MWs to 800 MW
failed in both the Newfoundland Supreme Court and Quebec Superior Court;
decisions later upheld on Appeal to the Supreme Court of Canada.

The 1969
Contract also awards Hydro Quebec the “energy and capacity” of the Upper Churchill.  Nalcor has never clarified the legal standing
of Section 5.2 of the Renewal Agreement which states in part “…whenever
additional capacity can…be made available, such capacity shall also be
available to Hydro Quebec on request”.  The
Crown Corporation has never said where its escape hatch is located for HQ’s seemingly
broad legal entitlement.

Nalcor was well
aware of that legal phraseology long before it counselled the Government to
sanction Muskrat. Today, more than two years later, legal clarity on that issue
continues to elude all concerned.

If Hydro Quebec’s right to purchase “virtually all” the “energy and capacity” of the
Upper Churchill (except for the Recall and Twin Falls obligations) is upheld by
the Court, it will mean a defeat for the Water Management Agreement; the
connection with Muskrat Falls is unmistakable…for everyone, except Dalley.

Related Reading:


Let’s look at
the issue from a different angle.

Under the WMA,
Nalcor claims the right to “bank” and retrieve energy, essentially using the Upper
Churchill’s Smallwood Reservoir as Muskrat’s reservoir.

The Water
Management Agreement seeks to give CFLCo the right to take energy from the
Upper Churchill during peak demand periods and replace it from the Muskrat
Falls facility, when Nalcor doesn’t need the power.

In theory, it
is a sound idea. It maximizes the power potential of the Churchill River.
However, the big
question is whether CFLCo has the legal right to enforce the WMA or if the Quebec
Superior Court will make it inoperable.

Only a fool
would contend the current legal dispute is ‘slam dunk’ for Nalcor.

The legal
challenge contains all the political machinations akin to that of the Mike
Duffy trial; in both cases, the governments prefer they got heard well after
the election in case the public wakes up to the implications each will lay bare.

And make no
mistake about it — the public deserves to be aware of the implications of a
failure of the WMA.

This is one of

If the WMA is
disallowed, Muskrat Falls, which has a rated capacity of 824 MW, may produce as
low as 175 MW due to a lack of water from the Upper.  It is just enough to supply the Nova Scotia
Block (167 MW).  That figure is based
upon Nalcor’s own testimony to the PUB.

While Nalcor
will tell you that Muskrat will generate just as much power whether the WMA
works or not, it doesn’t tell you the power may not be available when it
is needed. 

Nalcor doesn’t
tell you that HQ’s scheduling issues, that is, the time it takes for water
released from the Smallwood reservoir to arrive at Muskrat Falls, together with
the fact that the Muskrat reservoir is too small  to provide much reserve water, taken together,
conspires to make Muskrat (without a viable WMA) a near useless construction

Possibly love
for Nalcor will help people overlook, during a forthcoming winter, they can
have heat and a shower at 3AM (or whenever the water flows occur at Muskrat),
but not at 7AM (during peak demand), when they get out of bed.

Nalcor can increase the power generated from Holyrood…sound’s fine as long as
you know you are paying for that shower twice!

You should have
been warned of at least that much by Derrick Dalley.

That Quebec has
been a greedy and avaricious neighbour is proven.  Then, too, the Smallwood Administration was
an incompetent Government.  

Even after
Smallwood signed off on the water rights giveaway, he had the audacity to
proclaim during the official opening of the Upper Churchill:

“This is our
land. This is our province. This is our river. This is our waterfall…”

Bill Rowe, a
Cabinet Minister under Smallwood, writing in his book “The Premiers Joey
and Frank” had to this say about Joey’s proclamation: considering Quebec received
as much benefit as if “…they had owned the resource outright, poor Joey’s rant
would be perceived as the biggest piece of cockeyed bullshit ever orated…”

Derrick Dalley
continues the Danny Williams version of Joey’s oratorical manure.

The Danny
Williams crowd, including Cathy Dunderdale and Ed Martin, committed billions of
dollars to Muskrat Falls.

It was an
action of historic stupidity and recklessness, having failed, among other
things to, at least, ensure ahead of time that our legal position regarding the
WMA is unassailable.
Nalcor was
advised by the 2041 Group, especially by lawyers Bern Coffey, Dennis Brown, and
Cabot Martin who frequently spoke on the Group’s behalf, that it would be wise to
halt the process of sanction.

Bern Coffey
told the media: “billions of dollars are at stake. Legal certainty is required,
particularly in light of Hydro-Quebec’s past success in defending its power
contract rights…(t)he point is simply that the outcome of any such legal proceedings
is far from certain.”

The 2041 Group’s
advice did not suit Nalcor’s preferred narrative.

Even at this
late date, Derrick Dalley, the Minister of Natural Resources, cannot stand in
the House of Assembly and explain those issues or justify Nalcor continued
spending on Muskrat Falls. He seems incapable of grasping the implications of
what is about to unfold in a Quebec Superior Court Room. 

there is a court case going on”, stated Minister Derrick Dalley, in the House
of Assembly.

And that’s all Derrick
Dalley knows.
Des Sullivan
Des Sullivan
St. John's, Newfoundland and Labrador, Canada Uncle Gnarley is hosted by Des Sullivan, of St. John's. He is a businessman engaged over three decades in real estate management and development companies and in retail. He is currently a Director of Dorset Investments Limited and Donovan Holdings Limited. During his early career he served as Executive Assistant to Premier's Frank D. Moores (1975-1979) and Brian Peckford (1979-1985). He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB). Uncle Gnarley appears on the masthead representing serious and unambiguous positions on NL politics and public policy. Uncle Gnarley is a fiscal conservative possessing distinctly liberal values and a non-partisan persusasion. Those values and opinions underlie this writer's views on NL's politics, economy and society. Uncle Gnarley publishes Monday mornings and more often when events warrant.


If a Big Mac costs McDonalds $10 to produce and it is sold for $1.50, McDonalds will go out of business. They would not declare a profit!


Bill left public life shortly after the signing of the Atlantic Accord and became a member of the Court of Appeal until his retirement in 2003. During his time on the court he was involved in a number of successful appeals which overturned wrongful convictions, for which he was recognized by Innocence Canada. Bill had a special place in his heart for the underdog.

Churchill Falls Explainer (Coles Notes version)

If CFLCo is required to maximize its profit, then CFLCo should sell its electricity to the highest bidder(s) on the most advantageous terms available.


  1. So disappointing to have a minister of such an important portfolio that lacks the basic legal and financial knowledge to draw his own conclusions rather than take what Nalcor Et Al tell him as gospel. But look at the choice of potential ministers, it's not like there is a long list of qualified candidates waiting in the wind to manage this and other portfolio's. We'll take the former teachers, and retired civil servants, because in most rural area's that's the best we got as our political leadership.

  2. It was interesting to hear Gilbert Bennett on VOCM yesterday talking about the WMA. The issue is not the WMA, as that will always be enforced. The problem is that the WMA protects the rights of HQ as defined by the 1969 Power Contract. How that is interpreted in the current court case will not invalidate the WMA, but it will limit how Nalcor intend to use the WMA. Bennet is right, it will not impact the total amount of energy from MF. It will produce electricty when the water comes down the river. Whether we need it then or not.