NB Power pays J.D. Irving $12.3M in gypsum deal penalties, fees

New Brunswick Green Party Leader David Coon has criticized the 21-year gypsum deal between NB Power and Atlantic Wallboard Ltd.

It comes after revelations in a CBC News story that NB Power has paid the J.D. Irving company more than $12.3 million in penalties and contract renegotiation fees since 2009.

"The revelation that NB Power has a contract with J.D. Irving to provide gypsum from the oil-burning Coleson Cove plant until 2026 for [Irving's] wallboard plant and pay J.D. Irving when they can't deliver stunned many New Brunswickers," said Coon in the provincial legislature on Wednesday.

"It reminds me of the contract this government currently has with J.D. Irving to supply an unsustainable volume of softwood from the Crown lands for years into the future or pay up if they can't deliver. Mr. Speaker, when will this end?"

The 2005 contract commits NB Power's Coleson Cove Generating Station to provide a minimum amount of synthetic gypsum to Atlantic Wallboard Ltd. every year until 2026.

Gypsum is produced as a byproduct at oil-burning power plants, such as Coleson Cove.

According to NB Power, the contract states that in the event of a production shortfall, NB Power must pay for the difference between actual gypsum supplied and the minimum amount of gypsum agreed to in the contract.

NB Power has paid $5,334,004 in shortfall penalties since the 2009-10 fiscal year.

NB Power paid Atlantic Wallboard Ltd. another $5 million in 2010-2011 so that it could reduce the annual cap that it is required to meet, thereby reducing the penalties it has to pay in the future.

Recent contract renegotiation

Brent Staeben, the director of marketing and communications for NB Power, says the contract was again renegotiated recently, costing another $2 million.

"The contract has evolved over time to reflect the fact that the production at Coleson is changing," he said.

"We have been in constant talks and negotiations over the course of this contract with the buyer to ensure it better reflects the production at the facility."

NB Power has budgeted another $829,000 for a penalty payment for 2015-2016. The contract runs until 2026.

Despite the fact that Coleson Cove is producing less gypsum than anticipated, Staeben says the contract still makes economic sense because the gypsum needs to be disposed of one way or another.

"Originally we committed because we had some sense of how much we would be producing over time. We estimated that, at that time, when we looked into the future, we would need to landfill this," Staeben said.

"The cost of landfilling would be significant. In the tens-of-millions of dollars."

"Even with the changing nature of production there, it's still a very, very good deal for New Brunswickers," he added.

Coleson Cove is a peak-demand plant that normally operates between December and April.

NB Power says oil-burning plants like Coleson Cove make up between one and two per cent of its electricity generation. That figure, however, was 13 per cent in 2001.

Coleson Cove's gypsum storage dome is currently empty.

Commentary from the J.D. Irving company

J.D. Irving said in a statement to CBC News that "we believe NB Power has provided an accurate account to you regarding this matter. The confidentiality clause in our agreement with NB Power means we are unable to comment further."

In 2006, Atlantic Wallboard Ltd.'s franchise application to the New Brunswick Energy and Utilities Board stated: "without the synthetic gypsum from Coleson Cove, the project would not proceed as the economics to run a gypsum plant in Saint John, relying solely on natural gypsum rock would not be viable."

The document also stated that "over time, however, synthetic gypsum from NB Power's Generating Stations will be supplemented by natural gypsum (planned to be imported from out-of-province sources) to produce wallboard products."

NB Power will not disclose how much it is paid for gypsum or the minimum amount it is contracted to provide on an annual basis.

The corporation says it currently produces 20,000 to 30,000 tons of gypsum every year.