The Halifax Regional Environmental Partnership, a consortium of private companies, wanted to saddle taxpayers with any penalties that could result from failure to meet water cleanliness standards, George McLellan, the municipality’s chief administrative officer, told a news conference Friday.

 

Mr. McLellan said those terms were contrary to the agreement Halifax Regional Municipality had with the consortium, headed by Suez, a Franco-Belgian corporation, and its subsidiary United Water.

 

And the contract the municipality signed with the consortium in October 2002 is "not enforceable" because Ottawa didn’t give environmental approval in time to officially validate it, he said.

 

The consortium wanted to change the deal so the municipality would assume responsibility if the treated sewage pumped into the harbour didn’t meet government environmental standards.

 

"That doesn’t make much sense," Mr. McLellan said. "That’s not what we signed on for."

 

The municipality has been negotiating with the consortium for months over the matter. That has delayed the start of construction of the first treatment plant, planned for the corner of Barrington and Cornwallis streets in Halifax.

 

Municipal staff are studying the city’s options and will report back to council July 8.

 

Mr. McLellan said the municipality could negotiate a new agreement with some members of the consortium or find new partners.

 

"We can create relationships to get this done," he said.

 

He hasn’t ruled out legal action by either side.

 

"Anybody can sue anybody – that’s the great thing about this country," he said.

 

"We believe the right decision is the one that we made."

 

Council informed the consortium of its decision Friday.

 

Mayor Peter Kelly stressed that the project will continue, and construction of the first treatment plant will begin within weeks.

 

"We will go forward, but the partners will not be the same," Mr. Kelly said. "Our first responsibility is to our taxpayers, not any private company."

 

A vocal critic of the project said the public isn’t getting enough information.

 

"I’d really like to know who they are going forward with and what kind of technology they’re talking about," said Cliff White of Halifax Water Watch.

 

The contract to design, build and operate three treatment facilities was worth about $263 million, not including additional costs for inflation.

 

Gail Lavielle, senior vice-president of corporate affairs for United Water, said the consortium was surprised and disappointed by the decision.

 

Ms. Lavielle, who agreed the contract is not binding, said the consortium wants to continue negotiating.

 

"We’re absolutely ready and willing to do that," she said.

 

"We don’t think it’s too late."

 

She said the consortium was worried about industrial waste such as heavy metals getting into the sewage treatment system.

 

She said industrial waste should be prevented from entering the system, but the consortium doesn’t have the authority to do that.

 

"There was not enough clarity, we felt, in the contract to stipulate what would happen if it went over certain levels and who was responsible," she said.

 

It became an issue after a federal environmental agency raised it in its report that granted approval of the project in February, she said.

 

"This was something that really came to light as something that deserved more study," she said.

 

"At some point, that may have caused problems – so we just really wanted that to be clear."

 

Elizabeth Brubaker of Environment Probe, an environmental research group based in Toronto, said keeping toxins out of a sewer system intended for human waste is up to the municipality.

 

Ms. Brubaker, who has written a book that endorses having private companies treat sewage and deliver drinking water, said the deal Halifax had held a lot of promise.

 

Friday’s announcement is another major setback in efforts to clean up the harbour, into which about 181 million litres of raw sewage pours each day.

 

In the 1990s, now defunct Halifax Harbour Cleanup Inc., a Crown corporation, spent $20 million on a project that died because of skyrocketing costs.

 

Suez and its subsidiaries are no stranger to legal problems.

 

United Water had the drinking-water contract for the city of Atlanta, but both sides walked away from that deal in January.

 

Atlanta was unhappy because it wasn’t saving as much money as United Water had promised, Ms. Brubaker said.

 

United Water said that costs were high because the city didn’t reveal the poor shape of its pipes for distributing drinking water.

 

"It looks like they didn’t take a close enough look at the system before taking on the contract," she said.

 

Coun. Dawn Sloane (Halifax Downtown) said Halifax should have been concerned about Suez’s problems from the start.

 

"We should have been leery," she said. "I think we were naive."

 

Ms. Sloane had opposed having private companies operate a utility she felt should be kept in public hands.

 

"I am pleased we are no longer partners with Halifax Regional Environmental Partnership," she said.

 

Suez was involved in a bribery scandal in Grenoble, France, in 1989 that saw a former mayor sent to prison in 1996 for selling the city’s water service to a subsidiary of Suez, which, in exchange, had paid for his election campaign. An executive of the subsidiary was also convicted in the case.

 

Indianapolis replaced United Water as the operator of its sewage treatment system. Malfunctions had resulted in sewage being dumped on people’s property.