Ontario taxpayers on hook for $25 million over stalled wind power project

Energy company wins legal fight after province pulled the plug on offshore turbines.

TheStar.com
Oct. 13, 2016
By Rob Ferguson

An American firm fighting Ontario’s halt on offshore wind power has won a landmark $25-million claim for a energy project in Lake Ontario that was put on hold.

It’s a fraction of the $568 million sought by Windstream Energy, but it remains the largest award granted against the federal government in a challenge under the North American Free Trade Agreement.

While it was an Ontario government decision that halted the project near Kingston, NAFTA matters are a federal responsibility. The case was handled by trade lawyers at the Department of Global Affairs.

Windstream, which was also granted $2.9 million in legal costs, was seeking reimbursement for lost profits, arguing the Ontario government’s 2011 moratorium on offshore wind projects was “arbitrary, irrational and discriminatory.”

While the federal and Ontario governments consider “next steps,” the payout comes as residents of the province are feeling the sting of skyrocketing hydro bills, for which Premier Kathleen Wynne has promised to scrap the 8-per-cent provincial tax.

Ontarians are already footing costs of up to $1.1 billion for two natural gas-fired power plants scrapped by the previous Liberal administration of Dalton McGuinty before the 2011 election.

“We are disappointed by the (NAFTA) tribunal’s ruling,” spokesman John Babcock of the Department of Global Affairs in Ottawa said Thursday.

“However, we welcome the tribunal’s dismissal of the majority of the company’s claims, and its decision to award only a small fraction of the damages requested.”

Windstream said it considers the ruling a start at rekindling the project, because the tribunal ruled the company was treated “unfairly and inequitably.”

“This award is a good first step at remedying the challenges we have faced,” said Windstream director David Mars in a statement, noting the ruling also found the company’s contract for the 300-megawatt project, worth $5.2 billion, remains in force.

“We look forward to working with the Ontario government to build this project in accordance with the contract.”

That outcome appears unlikely, however.

Premier Kathleen Wynne’s government, which is struggling in the polls, announced last month that a surplus of electricity has prompted the cancellation of $3.8-billion worth of renewable energy projects to keep pressure off hydro bills.

The moratorium issued by the McGuinty government, which cited environmental concerns, stalled development of Windstream’s 300-megawatt wind-turbine installation off Wolfe Island, south of Kingston.

It had been approved six months earlier and the contract awarded, but construction was awaiting the completion of project engineering, wind and sound studies.

As such, the $25 million would be the latest cost to taxpayers for power that was not built in Ontario.

The province’s auditor general, Bonnie Lysyk, has found axing the gas-fired plants in Oakville and Mississauga could cost up to $1.1 billion over 20 years as the facilities are moved to the Sarnia and Napanee areas.

That long-term tab has been a magnet for criticism by opposition parties and electricity ratepayers.

The Ontario government said it stands by the 6-year-old halt on offshore wind projects and hailed the $25-million award as “significantly less” than the full claim.

“Ontario is carefully reviewing the decision and we understand that Canada is doing the same in order to determine next steps,” said a statement from the Ministry of Energy, headed by new minister Glenn Thibeault.

“The decision to place a moratorium on offshore wind is one our government still believes is correct. Ontario continues to take a cautious approach.”

The province and the federal government have three months to decide if they will go to court to ask the award be set aside.

The tribunal’s decision has not been released, but will be made public “as soon as possible,” Babcock said.

It’s unclear if Ontario would reimburse the national treasury for the money awarded Windstream.

“This dispute represents a very small portion of the billions in investments that Canada attracts and the billions that Canadian companies invest abroad. We are currently assessing the decision to determine next steps,” Babcock added in an emailed statement.

The decision by a NAFTA tribunal was reached recently following several days of hearings this year on the complaint filed in 2012.

As part of its green-energy push - heavily polluting coal-fired power plants were being phased out - Ontario awarded the Wolfe Island contract to Windstream in August of 2010.

Six months later, in February 2011, then-energy minister Brad Duguid ordered the offshore wind moratorium as the government prepared for an election in October.

The government, which was facing opposition from anti-wind power activists, denied the moratorium was for political reasons.

“There isn’t a lot of science on freshwater offshore wind,” Duguid, now economic development minister, said at the time.

In the meantime, the Liberal government continued development of land-based wind turbines.