Summary

NOTICE OF ARBITRATION AND STATEMENT OF CLAIM
UNDER THE RULES OF ARBITRATION OF THE
UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW
AND
CHAPTER ELEVEN OF THE NORTH AMERICAN FREE TRADE AGREEMENT

WESTMORELAND MINING HOLDINGS LLC,
Claimant/Investor,
v.
GOVERNMENT OF CANADA,
Respondent/Party
August 12, 2019

I. INTRODUCTION

1. This Notice of Arbitration and Statement of Claim is submitted on behalf of Westmoreland Mining Holdings LLC ("Westmoreland Mining Holdings"), a U.S. limited liability company, Westmoreland Canada Holdings Inc. and Prairie Mines & Royalty ULC ("Prairie"), as to the following legal dispute with the Government of Canada ("Canada," "GOC" or "Respondent") in accordance with Chapter Eleven of the North American Free Trade Agreement ("NAFTA").

2. Westmoreland Mining Holdings elects to proceed with this arbitration pursuant to Article 3 of the United Nations Commission on International Trade Law ("UNCITRAL") Rules, as provided under Article 1120(1)(c) of NAFTA.

II. SUMMARY OF THE CLAIM

3. Coal was an essential input to the production of electricity on a mass scale in the 20th century. It has been the primary source of electricity for the last one hundred years. Still today, coal is a primary source for electricity in much of the world and is the source supplying almost half of all electricity production in Alberta. It has been cheap and abundant, keeping electricity prices low and guaranteeing for consumers an affordable supply. But coal also generates carbon when burned and has been blamed for increasing greenhouse gas emissions.

4. In 2012, the Government of Canada decided to take action with respect to the greenhouse effects of burning coal. It enacted regulations that committed to closing down all power utilities that relied on coal within fifty years. These regulations ensured that existing coal-burning power utilities would be phased out over time, giving stability and predictability to both the power plants and the coal companies that provide the fuel.

5. In 2013-14, Westmoreland' acquired a number of coalmines, including the "mine-mouth" operations in Alberta at issue in this dispute. For mine-mouth operations, coalmines 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 so in Canada, which had just enacted regulations that provided a predictable future for coal.

6. The logic and value of Westmoreland's investment was threatened with change in November 2015 when a new Alberta provincial government announced its "Climate Leadership Plan." Alberta, which historically had 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.

7. Alberta recognized that an accelerated conversion from coal would have an adverse effect on companies relying on coal to generate power. Alberta, therefore, commissioned Terry Boston, the retired head of one of North America's largest power grids, to determine how to reconcile the new policy of accelerated conversion from coal with the adverse impact on companies relying on coal.

1 As set forth in more detail below, Westmoreland Coal Company transferred most of its assets, including the assets at issue here, to Westmoreland Mining Holdings. This transfer was accomplished pursuant to a Plan of Reorganization approved by a U.S. federal bankruptcy court on March 15, 2019. The term "Westmoreland- is used generically throughout this Notice of Arbitration and Statement of Claim to describe the facts and circumstances of the dispute. When deemed appropriate, specific references have been made to Westmoreland Mining Holdings or Westmoreland Coal Company.

8. Based upon Mr. Boston's recommendation, Alberta agreed to pay out nearly $1.4 billion to three coal-consuming power utilities, all of which were Albertan companies and considered household names. Two of the three, TransAlta and Capital Power, also owned interests in mine-mouth coalmines.2 All three companies are now accelerating their conversions of coal-burning units to natural gas before 2030. The new provincial policy also necessarily accelerates the end of Westmoreland's mine- mouth operations.

9. Alberta's Energy Minister, when the coal payouts were issued to the companies, stated that they were intended to compensate for the "economic disruption to {their} capital investments" caused by the sudden policy shift and to "provide investor confidence and encourage them to participate in Alberta's transition from coal." The compensation was directed to "Alberta businesses": "{t}he {Alberta} government is committed to working with existing Alberta businesses as we transition away from coal, and we are making good on that commitment today."

10. In return for these payouts, which were based on the book value of the assets (including the coal), the power companies agreed (among other things) to waive any claims with respect to the phase-out of coal, "including with respect to the mines, coal supply agreements, mining contracts, or other mining equipment related to the coal used to fuel the Plants."

11. Westmoreland's operations were integral to the operations of the Albertan power companies. Like the Albertan companies, Westmoreland owned and managed coalmines. Yet, unlike the Albertan companies, Westmoreland was an American company and investor in Alberta. Unlike the Albertan companies, Westmoreland received no compensation for damages caused by the accelerated Alberta coal phase- out, including stranded capital, loss of revenues, and accelerated costs of reclamation, the process of rehabilitating the land after coalmining operations have ceased.

12. Westmoreland recognizes and does not dispute that Canada and Alberta are entitled to enact regulations for the public good. However, when they do, they must be fair to foreign investors consistent with NAFTA Articles 1102 and 1105.

13. Alberta's scheme to compensate Albertan coalmine operators for the loss of their investments, to the exclusion of the only American coalmine operator, denied Westmoreland national treatment under Article 1102 and treated the company unfairly and inequitably, in violation of NAFTA Article 1105. The exclusion of the only American company was wrong, and Westmoreland is entitled to compensation for Alberta's violations of these NAFTA provisions.

14. Westmoreland respectfully serves this Notice of Arbitration and Statement of Claim for breach by the Government of Canada ("Canada"), through the actions of the provincial Government of Alberta, of its obligations under NAFTA, Chapter Eleven.

...

Footnotes omitted