$6.5M legal bill for failed Churchill Falls contract challenge

A seven-year battle with Hydro-Quebec over the Churchill Falls power contract has cost Newfoundland and Labrador more than $6.5 million, according to a confidential briefing note obtained by CBC News.

In October officials in the Department of Natural Resources told the minister more money was needed to continue the legal fight.

The note was obtained by CBC News through access to information legislation.

• Nalcor seeking Supreme Court of Canada appeal after recent Churchill Falls decision
• 2nd Quebec court rejects appeal of 1969 Upper Churchill contract

In 2010 Newfoundland and Labrador launched a legal challenge to the agreement with Hydro-Quebec, arguing the 1969 deal was lopsided because it allows Quebec to purchase power from Churchill Falls at extremely low rates, reaping big profits when it resells that power.

Courts in Quebec have all sided with Hydro-Quebec, and now Nalcor wants to take its case to the Supreme Court of Canada.

The department had $900,000 budgeted to spend between 2016 and 2018, but late last year told the minister it needed more money to argue the case before the Supreme Court of Canada. The court hasn't yet agreed to hear the case.

The department blacked out how much money it was asking for, citing solicitor-client privilege.

The minister, Siobhan Coady, also declined to say how much will be spent this year, saying in a statement that the government continues to support a case that "has the potential to benefit all Newfoundlanders and Labradorians."

Most of the money has been used to pay for lawyers in Quebec to prepare and argue the case.

Department officials warned that if more money wasn't handed over the case would stop and it would "eliminate the potential that N.L. might begin to obtain fair value for the inequitable power contract."

Could have to cover Quebec costs

The legal fight could get a lot more expensive.

In ruling against Newfoundland and Labrador, the Court of Appeal of Quebec also ruled N.L. also has to pay Hydro Quebec's legal costs. The briefing note doesn't say how much that could be.

But if Newfoundland and Labrador does win at the Supreme Court, the tables could turn, and Hydro Quebec could be forced to pickup this province's costs.