TORONTO - The fight over an $81-million energy centre that was built by Ontario's troubled lottery corporation to power a Windsor casino got uglier both inside and outside the courtroom Tuesday as new questions emerged about the plant's true value.

A confidential study that assessed the plant's value in 2008 said it could be worthless or fetch up to $60 million, said Finance Minister Dwight Duncan.

The government is trying to recoup some of the taxpayers' dollars that was spent by the Ontario Lottery and Gaming Corp. to build it, he added.

"Bottom line, we are going to court to protect the interest of Ontario taxpayers in this," said Duncan, who took over responsibility for the OLG five months ago.

The OLG is countersuing the companies that designed, built and operated the plant - until recently - for $60 million.

The plant's ownership is already the subject of a $355-million lawsuit filed by Buttcon Energy and Buttcon Ltd. against the OLG, its former CEO Kelly McDougald and current executive Larry Flynn.

Buttcon's lawsuit, which was filed in August, alleges breach of contract, abuse of power and other claims that haven't been proven in court.

In a counterclaim filed Nov. 10 with the Ontario Superior Court of Justice, OLG denies Buttcon's allegations and any claims for compensation.

It alleges that Buttcon had no experience in constructing or operating an energy centre, and breached the terms of its agreement by failing to properly design the plant, which the OLG claims cannot be safely connected to the local power grid.

Court documents also reveal that the OLG harbours little hope of getting what it paid for without sinking more money into the plant.

"As a result of Buttcon's improper design of the energy centre, large portions of it will have to be redesigned and constructed," the OLG statement said.

"Equipment will need to be replaced and/or reconfigured. Even with the redesign and reconstruction work, as a result of problems created by Buttcon's design, the energy centre will be unable to operate in an efficient, cost-effective manner."

Michael Miller, a Toronto lawyer representing Buttcon, said the allegations contained in the OLG's statement of defence and counterclaim are false and his clients are prepared to dispute them in court.

The plant was constructed "to full compliance" with the OLG's design specifications, Miller added.

"What the Buttcon Group has been forced to go to court for is to enforce its rights to purchase the facility and to assume all responsibility for it," he said.

"But OLG is now fighting - at taxpayers' expense - to hold on to it in violation of the agreement with Buttcon. So it's quite interesting. They're not letting us buy it, and then at the same time saying it's not properly constructed."

Duncan said he can't determine whether taxpayers' money was wasted on the plant - dubbed the "Dwight Elephant" by the Opposition - which came in well over its initial $40-million budget.

"Let me just say, I find the whole set of circumstances around its creation rather bizarre," Duncan said.

According to court documents, the OLG put out a contract for the design and construction of the plant in September 2006.

A multimillion-dollar expansion of Caesar's Windsor casino was already underway, and the OLG needed a separate energy centre for heating, cooling and "standby electrical needs," the documents said.

Neither Flynn nor McDougald, who joined the OLG in September 2007, were "directly involved" in the expansion project at its outset, the documents said.

The OLG intended to hire a company to design, build, operate and own the plant and supply some of the expanded casino's energy needs under a long-term agreement with the agency. The company was also supposed to bear the costs associated with building the plant in exchange for the energy deal.

It reached an agreement to "negotiate exclusively" with a group consisting of Buttcon, Embedded Energy Inc. and Black & Mcdonald Ltd. "in hopes of eventually reaching an agreement," but never "awarded" them the contract, according to the OLG's statement of defence.

The project was fraught with problems and negotiations dragged on for months, the OLG said.

By February 2008, costs for the plant had climbed to $61.5 million and Buttcon was unable to provide a detailed estimate of how much it would actually cost to complete construction, the OLG alleges.

When the OLG questioned Buttcon about the soaring costs and stopped payments, Buttcon "threatened to cease all work on the project unless its bills were paid immediately without protest," and the agency complied to ensure that the project went ahead, the OLG claims.

Around that time, the OLG terminated the employment of one of its senior executives who was in charge of the casino expansion. The plant was not completed by the time the expanded facilities opened in June 2008 and didn't generate electricity, the OLG said.

Duncan, who represents a Windsor riding, has come under fire in recent months over the soaring cost of the plant.

Provincial auditor Jim McCarter needs to investigate why the OLG got into the energy business in the first place and spent millions of taxpayers' dollars on a plant in senior cabinet minister Sandra Pupatello's riding.

"It's certainly worthy of a very, very serious look, because the abuse of taxpayers' money just goes on and on and on with this government," said Tory critic Peter Shurman.

The government has acknowledged that the original agreement with Buttcon was untendered.

The energy plant saga is just another spending scandal for a government that's already wasted millions of dollars in a mismanaged effort to create electronic health records, said NDP Leader Andrea Horwath.

The plant, which sits on top of a parking garage near the casino, currently supplies hot water, cooling and backup electricity to the expanded facilities, which includes a hotel tower, convention areas and entertainment centre, according to court documents.

But it doesn't generate electricity because the four natural-gas fired generators that were bought to produce energy haven't been commissioned or hooked up to the local electrical grid, the documents say.

Duncan has said the enormous price tag attached to the plant was one of the reasons he cleaned house at the OLG in August, just a few weeks after he took over responsibility for the corporation from Energy and Infrastructure Minister George Smitherman.

The OLG board was replaced and McDougald was fired on the same day the government released thousands of pages of what were deemed "unacceptable" expense claims filed by lottery executives.

McDougald has launched an $8.4-million wrongful dismissal suit against OLG, the Crown and Duncan, claiming breach of contract, moral and punitive damages, defamation and "loss of opportunity to enhance reputation." The Ontario government has said it will dispute the claim.

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