Nothing will go wrong if an Ontario government tries to hastily cancel a power plant that’s already under construction, right? Recent provincial history offers no examples of a governing party making decisions like this and then being haunted by them for years afterwards, right?
The Progressive Conservatives must be telling themselves something along those lines: they’re preparing to legislate an end to the White Pines wind power project, which is already under construction in Prince Edward County (in the riding of PC MPP Todd Smith, the new government house leader). Earlier this year, during the election period and after repeated appeals to tribunals and courts, White Pines received approval to begin construction.
Smith told reporters on Wednesday that the government won’t be facing the likes of the billion-dollar bill the Liberals racked up after cancelling two natural-gas power plants in the GTA. That’s because the Tories will use legislation to halt the operations of this wind project. Smith promised that neither taxpayers nor hydro ratepayers (who are the same people) will end up footing the bill for the government’s decision.
“Cancelling this project will actually be a net benefit to Ontario,” Smith told reporters. “We know that industrial wind turbines are providing power predominantly when we don’t need it.”
The company behind White Pines, on the other hand, says that the move will cost Ontario $100 million.
Who’s right? It’s complicated.
The Tories’ approach won’t be clear until they formally present legislation on Thursday afternoon, but the outlines of the plan are relatively straightforward: Queen’s Park has the power to break a contract through legislation and to specify in that legislation that the Ontario government is not liable for costs or harms caused by breaking the contract.
The trick, in essence, is that it’s not theft if the government passes a law legalizing it. It’s a concept that Queen’s University law professor Bruce Pardy has been writing about for years, including in a 2014 paper for the Fraser Institute.
“It’s a power that’s been used occasionally, but not often,” Pardy told TVO.org on Tuesday. “It may be that the conservatives think this is an appropriate case to say, ‘Enough.’”
Unlike the American constitution, neither the 1867 Canadian Constitution nor the Charter of Rights and Freedoms explicitly guarantees private-property rights. That means that as long as legislatures stick to their respective jurisdictions (i.e., provinces don’t try to legislate in federal affairs and vice versa) and don’t abridge the Charter, they can legislate what they want, and they’re not obligated to compensate a private company or individual for losses.
This power isn’t limited to renewable energy, either. Theoretically, a government could break any contract negotiated by its predecessors or itself. The Tories could end the 407 ETR lease signed by the Harris government in 1999, which handed a lucrative toll expressway over to a foreign-owned company.
In principle, the power is limited only by how much a government is willing to use it, balanced against the fear that abusing the power could drive business investment away from a province governed by a party that can’t be trusted to hold up its end of a deal. The Tories are, for their part, doing everything they can to reassure the business community that this will be a one-off, insisting that White Pines shouldn’t have been given the go-ahead during the writ period. They don’t want this to be seen as the start of a wider campaign against renewable energy projects in Ontario.
The fact that White Pines is owned by a multinational company makes things stickier. Remember the Liberal offshore wind power moratorium? Under Dalton McGuinty, the Liberals twice announced a halt to offshore wind projects just around election time — and later got sued. The wind energy companies, however, mostly lost their battles in Ontario courts. Where they won was at NAFTA’s international tribunal, which is designed to protect foreign investors from just this kind of treatment.
And here’s why Pardy says the government could be in trouble: the province may have the right to do something under Ontario and Canadian law but run into trouble at an international trade tribunal. White Pines is backed by the German-owned WPD Group, which might have a claim against Canada at an international body.
“Those parties are actually better protected than domestic investors would be,” Pardy says.
But there’s an additional wrinkle here, too: the federal government, not Ontario, is party to major trade agreements, so the province could be found to have harmed WPD Group — but, formally, it would be the feds, not Queen’s Park, that would be on the hook for damages. This was the case in the offshore wind example, but Ontario accepted it would pay the damages. This isn’t automatic: when forestry company Abitibi-Bowater (now Resolute FP) threatened to file a NAFTA case after the province of Newfoundland and Labrador expropriated its property, the federal government paid $130 million to settle the case.
So the Tory government could be looking at a situation in which it’s nearly impossible for it to lose, politically: WPD could sue in Ontario court, but the province has a century of precedent to rely on. And if it were to lose at an international tribunal, the bill would be handed to the Liberal government in Ottawa — not to Queen’s Park.
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