Ontario’s government signed an electricity deal with an American company to build a wind farm at the eastern end of Lake Ontario, froze the project, and then wanted to treat its own decision like an uncontrollable act of God to get out of the contract it signed, an international panel found in a ruling saying such behaviour is not OK.
We knew our provincial government’s treatment of U.S.-backed Windstream Energy was bad. To see a panel of three arbitrators — a Finn, a Spaniard and an American, with an international court based in The Hague — lay out just how bad is still startling.
The finding is in the just-released written ruling that makes taxpayers cover $28 million in expenses for Windstream, which got as far as a contract to sell the power it was going to generate. Ontario stopped the project in 2011 as part of a mass moratorium on offshore wind-energy projects.
Windstream challenged the decision under the North American Free Trade Agreement, saying it had been treated unfairly.
In 2011, and ever since, the Ontario government has insisted it was worried that planting windmills in the beds of the Great Lakes would stir up old pollution from the bottom. The environment minister at the time, John Wilkinson — who’s now out of politics — testified at length that he was spooked by the deaths from dirty water at Walkerton and wouldn’t stand for any risk to either Canadian or American drinking water.
The energy minister then, Brad Duguid — who’s now Ontario’s economic development minister — said publicly when the government imposed the moratorium almost six years ago that politics had nothing to do with the decision. The Liberals were heading for an election and people with lakefront property didn’t like the prospect of wind farms in their expensive views. But the decision was strictly about a lack of scientific knowledge, Duguid said.
Wilkinson’s drinking-water worries were genuine, the panel ruled. “At the same time, however, the evidence before the tribunal suggests that the decision to impose the moratorium was not only driven by the lack of science,” its ruling says. “The impact of offshore wind on electricity costs in Ontario, as well as the upcoming provincial elections in November 2011, also appear to have influenced the decision, and the latter in particular in light of the public opposition to offshore wind that had emerged during the relevant period in many parts of rural Ontario.”
The panel was “unable to find, on the basis of the evidence before it, that these concerns were the predominant reason for the moratorium,” but let’s not pretend they didn’t matter at all. The bigger political challenge was with other projects, but Windstream got caught up with the rest of them.
If Wilkinson had stopped wind-farm projects in alarm over water safety, the rest of the government doesn’t seem to have realized it. Civil servants and political staff spent weeks batting around options for the wind-farm problem, long after Wilkinson had supposedly kiboshed all the projects.
The ruling says “the evidence before the tribunal suggests that Mr. Wilkinson’s decision was not a definitive one, or at least not effectively communicated within the Government of Ontario, or even within (the environment ministry).”
It took more than a month before Wilkinson’s final decision, which he testified he alone had the power to make, became what was actually going to happen.
And, the panel noted, “The government on the whole did relatively little to address the scientific uncertainty surrounding offshore wind that it had relied upon as the main publicly cited reason for the moratorium.” To this day, the Liberals have commissioned no research whatsoever on whether planting windmills in lakebeds stirs up tainted sediment.
What makes that especially ugly, in the tribunal’s view, is that the government let Windstream dangle, telling the company its generating contract was still good and it just had to wait for the science nobody was doing. The government left the Ontario Power Authority, its electricity-buying agency, to sort out the details. But the agency had nothing to do with the moratorium and didn’t know how it might be resolved any more than Windstream did, so of course nothing got sorted out.
The government’s interference was treated as “force majeure,” an act of God neither Windstream nor the power authority could do anything about but wait.
After two years went by, a provision in the contract kicked in that allowed the power authority to walk away. It didn’t do that, but once Windstream’s only customer could cancel the contract whenever it felt like it, the hypothetical wind farm became impossible to finance. The OPA refused to consider alternative projects, to return a $6-million letter of credit Windstream had put down, or to put off the walk-away clause.
The government argued Windstream knew Great Lakes wind power was new and there was a lot of regulatory uncertainty about it. Yes, the panel said, but the government didn’t try to resolve that uncertainty. Instead, the government aggravated it.
“The regulatory and contractual limbo in which (Windstream) found itself in the years following the imposition of the moratorium was a result of acts and omissions of the Government of Ontario,” the tribunal found.
That’s why we’re on the hook for $28 million and counting. And the dream of making Ontario a green-energy powerhouse is in tatters.
Ottawa Sun December 8th 2016 David Reevely