CLAIMANT'S NOTICE OF ARBITRATION
II. SUMMARY OF THE CLAIM
III. PROCEDURAL REQUIREMENTS
IV. FACTUAL BASIS FOR THE CLAIMS
A. Westmoreland Invests in Canada
B. Alberta Enacts its Climate Leadership Plan
C. Compensates Only Canadian Companies for Reducing The Useful Life Of Coal Burning Units
D. Canada Accelerates the Phase-Out of Coal Even Before 2030, Exacerbating Westmoreland's Losses
E. Alberta Expects to Eliminate Coal-Fired Emissions from Electricity Generation by 2023
V. WESTMORELAND FILES FOR ARBITRATION AND FOR BANKRUPTCY
VI. CANADA'S VIOLATIONS OF NAFTA CHAPTER ELEVEN
A. Canada's Breach Of Article 1102 - National Treatment
B. Canada's Breach Of Article 1105 - Minimum Standard Of Treatment
C. Canada's Breach of Article 1110 - Expropriation
VIII. WESTMORELAND SATISFIES THE REQUIREMENTS OF NAFTA
CHAPTER ELEVEN SECTION B
A. Consent and Waiver
B. Westmoreland is Qualified to Submit its Claims to Arbitration Pursuant to
NAFTA Articles 1116 and 1117
1. Westmoreland Qualifies as an "Investor"
2. This Arbitration Involves a Protected "Investment"
3. Westmoreland's Claims are Timely
4. Notice Requirements
C. Constitution of the Arbitral Tribunal
IX. RELIEF SOUGHT AND APPROXIMATE DAMAGES CLAIMED
1. Westmoreland Coal Company ("Westmoreland"), a U.S. corporation, respectfully submits this Notice of Arbitration and Statement of Claim on behalf of itself and its Canadian enterprise, Prairie Mines & Royalty ULC ("Prairie"), as to the following legal dispute with the Government of Canada ("Canada," or "Respondent") in accordance with Chapter Eleven of the North American Free Trade Agreement ("NAFTA") and Annex 14-C of the United States-Canada-Mexico Agreement ("CUSMA").
2. Westmoreland elects to proceed with this arbitration pursuant to Article 3 of the United Nations Commission on International Trade Law ("UNCITRAL") Arbitration Rules adopted on December 15, 1976, as provided under Article 1120(1)(c) of NAFTA. Westmoreland also proposes that the arbitration be administered by the International Centre for the Settlement of Investment Disputes ("ICSID") and that the arbitration be seated in Washington, D.C.
II. SUMMARY OF THE CLAIM
3. Throughout the twentieth century, coal was an essential input to the mass production of electricity, supplying more than half of all electricity produced in Alberta. It was cheap and abundant, which kept electricity prices low and guaranteed an affordable and reliable supply of electricity for consumers.
4. In 2012, the Government of Canada decided to take action to address the greenhouse effects of burning coal. However, in enacting the regulations, Canada proposed that the conversion away from coal take place over a fifty-year period to minimize the burden of the energy transition to the impacted parties.
5. In 2014, Westmoreland acquired a number of coal mines in Canada, including the "mine- mouth" operations in Alberta at issue in this dispute. For mine-mouth operations, coal mines are developed adjacent to and in conjunction with a power plant so that the coal can be delivered to the power plant economically. Such mine-mouth operations formed the core of Westmoreland's business and offered a predictable return, especially in Canada, which had just committed to allow coal production for fifty years from the date of commissioning of the relevant power plant.
6. Shortly after Westmoreland completed its investment in Canada, the value of that investment came under threat in November 2015 when a new Alberta provincial government announced its "Climate Leadership Plan." Alberta, which historically relied primarily on its abundant coal supply to fuel its power plants, decided that it wanted to eliminate all power emanating from coal by 2030 (i.e., decades earlier than provided in Canada's 2012 regulations).
7. Alberta recognized that an accelerated transition from coal would have an adverse effect on companies that had invested in the coal-powered electricity generation sector. By 2015, Alberta made "clear commitments not to strand investor capital" and, consistent with those commitments, recognized the need to provide "appropriate compensation to investors in coal generating assets which will be affected" by the Climate Leadership Plan.1 Pursuant to those commitments, Alberta agreed to pay out nearly CA$1.4 billion to three coal- consuming power utilities - ATCO, Capital Power, and TransAlta - all of which were Albertan companies and considered household names
8. Notwithstanding Alberta's recognition in the Climate Leadership Plan of the importance of protecting stranded investments, and notwithstanding its decision to compensate the power plants affected by the Climate Leadership Plan, Alberta provided no compensation to Westmoreland's mine-mouth operations. Unlike the Albertan companies that received compensation for their transferred investments caused by the energy transition, however, Westmoreland received no compensation under the Climate Leadership Plan.
9. Thereafter, in 2016 and 2018, Alberta and the federal government, respectively, enacted carbon pricing regulations. The carbon pricing regulations imposed higher surcharges on coal-fired emissions relative to other sources of energy, such as natural gas. These measures increased the cost of coal-fired electricity generation compared to other sources of electricity and effectively eliminated the market for thermal coal. Alberta's payments to coal-consuming power utilities, which provided capital to retrofit coal-fired power plants to run on natural gas, combined with these carbon charges, accelerated the transition away from coal even earlier than the 2030 deadline in the Climate Leadership Plan.
10. The combined effect of these measures was devastating for Westmoreland's investments. Because of the mine-mouth structure of the operations that Westmoreland had acquired, there was no other market for the coal produced from those mines; the quality and location of the coal rendered it uncompetitive for any use other than as a dedicated supply for the adjacent power plants.
11. Westmoreland does not dispute that Canada and Alberta are entitled to enact regulations to combat climate change. However, the state must carry out such acts in a manner that is consistent with Canada's obligations under NAFTA. Alberta's decision to transition away from coal-fired power generation and Alberta's scheme to compensate Albertan coal mine operators for the loss of their investments--to the exclusion of the only American coal mine operator similarly affected--denied Westmoreland national treatment under Article 1102; constituted unfair and inequitable treatment of the company in violation of NAFTA Article 1105; and unlawfully expropriated Westmoreland's investment after 2030 under NAFTA Article 1110. In addition, the imposition of carbon charges by Alberta and Canada, which rendered thermal coal economically unviable well before 2030, unlawfully expropriated Westmoreland's investment before 2030 in violation of NAFTA Article 1110.
12. Westmoreland respectfully serves this Notice of Arbitration for Canada's multiple breaches of its obligations under NAFTA, Chapter Eleven, including, but not limited to, the actions of the provincial Government of Alberta described herein.
13. The facts of this case are not new to Canada. They are related to an earlier arbitration in which Canada successfully argued that WMH--which attempted to purchase Westmoreland's NAFTA claim in U.S. bankruptcy proceedings--had no standing. This Notice of Arbitration relies on the same or related claims, facts, and harms of which Westmoreland and its purported successor-in-interest, Westmoreland Mining Holdings LLC ("WMH"), put Canada on notice no later than 2018 in ICSID Case No. UNCT/20/3. In that case, Canada prevailed in arguing that WMH lacked standing under NAFTA because the purported assignment of the claims from Westmoreland to WMH in the bankruptcy proceedings of Westmoreland was ineffective under international law. As set forth in further detail below, Westmoreland has cured that jurisdictional defect in the present arbitration, and seeks relief for Canada's wrongful conduct.
Footnotes omitted from this introduction