A company at the centre of Ontario's gas plant scandal is facing new problems, accused of building a gas pipeline without a permit and embroiled in disputes with trade unions.
Allegations in complaints to the Ontario Energy Board and the Ontario Labour Relations Board against Eastern Power and its subsidiary, Greenfield South, concern a gas-fired power plant the company is building near Sarnia. The firm, run by brothers Gregory and Hubert Vogt, received the contract for the Lambton plant as compensation after the government ignited a controversy by cancelling a facility they were building in Mississauga, Ont.
That Mississauga plant was beset with problems. First, it was delayed for several years as Eastern, which had never built anything that size before, struggled to get it off the ground. Then, local opposition to the plant grew. With the re-election prospects of local Liberal MPPs threatened, then-premier Dalton McGuinty promised to cancel the project at the height of the 2011 election campaign.
(What is the Ontario Liberals' gas-plants scandal? Read the Globe's easy explanation)
Eastern drove a hard bargain in exchange for stopping construction, the provincial Auditor-General later found.
Among other things, the company received a $36-million payout for sunk costs, the contract for the Lambton plant and a $45-million no-interest loan from the province to help build it. The costly mothballing of the Mississauga plant, along with a plant in nearby Oakville to be constructed by TransCanada Energy, visited serious political damage on Mr. McGuinty, who resigned as the scandal heated up.
Consequently, the province has a lot riding on the Lambton project: It must succeed for the government to salvage any good from the gas plant debacle. But Eastern has faced multiple regulatory entanglements, squaring off with a gas company and two different unions levelling a range of accusations.
The energy board is still investigating the complaint that the company began work on a gas supply line without authorization.
An official with the Independent Electricity System Operator (IESO), the government agency that oversees private power plants in Ontario, declined to discuss Eastern's troubles in any detail.
"I really don't know about the validity of any of these claims, so I really can't comment," Michael Killeavy, IESO's director of contract management, said in an interview. Despite the holdups, he said the company appears to be on track to meet its Sept. 1, 2017, deadline to get the plant up and running: "We think that they will be on time."
Gregory Vogt, reached at the company's Toronto office, said he did not have time to talk. "I'll get back to you," he said. Mr. Vogt and his brother did not respond to subsequent messages seeking comment.
The pipeline accusation involves a tussle between Eastern subsidiary Greenfield and Union Gas. The plant is within Union's service territory, but Greenfield wants the Ontario Energy Board's permission to buy gas from a different company by building a connection to a nearby pipeline, which it maintains would be more convenient.
Now, Union alleges Greenfield simply went ahead and built a pipeline to set up a gas connection without getting the OEB's approval. Photographs taken by Union employees and filed with the OEB show pieces of yellow pipe, half covered by snow, on what Union says is Greenfield's property. A valve for the pipe also appears to stick out of the ground in one photo.
In its OEB letter, Union wrote that one of its workers "observed that a high pressure steel pipe had been trenched and buried from Greenfield South's generation plant under construction."
The OEB referred the matter to its compliance department to investigate. OEB spokeswoman Karen Evans said the probe is "ongoing" and no decisions have been made. Patrick McMahon, Union Gas's manager of regulatory research and records, told The Globe the company will not comment as the dispute is before the OEB.
The Vogts have also battled two different trade unions.
A complaint from the United Brotherhood of Carpenters and Joiners of America, Local 1256, to the Ontario Labour Relations Board paints a picture of a chaotic workplace. One carpenter foreman was "forced" to "place employees in unsafe positions and complete tasks without regard to proper safety procedures," the union alleged. Other carpenters accused Eastern of "irrational, unreasonable, and often unsafe management of the project," it said.
The union said in the complaint its members showed up for work at Greenfield's site one day to find the company had not appointed anyone to supervise them, and so they left. When they returned the next week, they were barred from the site. The union also said Greenfield hired and fired one carpenter no less than three times.
A labour board decision suggests the carpenters' union complaint was ultimately settled, but provides few details. Exactly what Eastern's alleged "unsafe" practices were is not made clear. Carpenters' officials and their lawyer did not respond to a request for further information, and the board's librarian said some of the documents detailing the carpenters' union complaints are "confidential."
Greenfield faced a separate accusation from the Labourers' International Union of North America in May, 2014. LIUNA alleged in a complaint to the labour relations board that Greenfield broke collective agreements with the union by hiring a non-union contractor, Clark Trucking. Exactly what happened to that dispute is unclear, and LIUNA's lawyers did not respond to a request for comment.
The gas plant saga began in the spring of 2005, when the Vogt brothers received contracts to build two plants in Mississauga. But they had trouble securing construction financing. First, they scrapped one of the plants. Then, they renegotiated the contract for the second plant to push back its completion date from 2009 to 2014. Eastern only received financing in May, 2011, by going to a group of hedge funds led by Washington-based EIG Management Co., which charged 14-per-cent interest.
The auditor's report said that in their deal with the province in exchange for stopping construction, the Vogts got the government to pay off the hedge funds for them – a cost of $149-million – pay Eastern's suppliers $64.6-million, and pay Eastern $36-million for sunk costs. Some of the costs Eastern claimed were later questioned by the Auditor-General: These included nearly $900,000 that they said was for the salary of an administrative assistant.
In addition, the Vogts got to keep the land in Mississauga where the gas plant was to be built and received the Lambton contract plus the $45-million loan.