New Brunswick Power resumes lawsuit over Orimulsion supply deal for Coleson Cove plant
New Brunswick Power Holding Corporation has resumed legal action against the Venezuelan suppliers of Orimulsion to its Coleson Cove generating station. Parties named in the action include Bitumenes Orinoco SA (Bitor), Petroleos de Venezuela SA. (PDVSA) and the Venezuelan government. NB Power had previously initiated the lawsuit but suspended it about a year ago in an effort to negotiate a settlement with the Venezuelan suppliers of Orimulsion.
The effort failed, however, and NB Power is now seeking a performance order directing PDVSA and BITOR to fulfill their obligations under the fuel supply agreement between it and the Venezuelan parties. Failing this, the action seeks damages for breach of contract in an amount to be determined, but presently estimated at about $2.2 billion.
As an alternative, NB Power is seeking damages from PDVSA, BITOR and Venezuela for breach of the duty of good faith arising out of the special relationship between the parties and/or damages for negligent misrepresentation in an amount to be determined, but presently estimated at about $560 million. As a further alternative, NB Power is seeking from PDVSA, BITOR and Venezuela restitution based on the unjust enrichment of the defendants.
The lawsuit was filed simultaneously in New Brunswick's Court of Queen's Bench and in the State of New York. NB Power has offered to consent to a stay of the action in New Brunswick if PDVSA and BITOR agree to arbitrate the contract claim in New York in accordance with an arbitration clause in the fuel supply agreement. The arbitration would be conducted under the auspices of the American Arbitration Association.
Whichever option is used to resolve the issue - litigation or arbitration - NB Power expects that it will take two to two and a half years to arrive at a decision. In New Brunswick, NB Power is being represented by Ken McCullogh, of the law firm of Stewart McKelvey Stirling and Scales. In New York, legal representation is being handled by the firm of Simpson Thacher & Bartlett LLP.
Coleson Cove-at 1,000 megawatts, NB Power's largest generating station-was built in the 1970s and underwent a $750-million refurbishment over two years to ensure the facility's compliance with newer, more stringent environmental standards. The project began in the fall of 2002 and was completed in November 2004.
As part of the upgrading, plans called for conversion of the plant from burning heavy fuel oil to Orimulsion(r), an emulsion containing 70 % natural bitumen dispersed in 30% of water. Early last year, however, construction of the fuel delivery system for the material was stopped when NP Power launched its litigation over the supply agreement (ELW March 1, 2004). The $2.2 billion in damages being sought represents the financial benefit associated with using Orimulsion as Coleson Cove's primary fuel over the 20-year term of the agreement.