As January 1, 2017, the day which marks “ground zero” for climate change reform in Ontario draws near, the provincial government is scrambling to put into place a structure of reforms and incentives that will support its sweeping climate change promises. As you’ll recall from our previous posts, Ontario’s goal is to have a live cap-and-trade plan as of January 1st, and the Province is expecting allowance auction revenues of upwards of $1.8 billion per year. In an effort to inspire confidence and relieve industry tension, the provincial cabinet leaked some details of their “transformational” Climate Action Plan, which contains a detailed strategy on how Ontario plans to achieve its future climate change goals.Continue Reading...
Energy East, when all is said and done, will serve as a fascinating case study for many decades to come. In the meantime, the project once publicly dubbed “pharaonic and utopic” by the CEO of a major energy corporation will continue to polarize Canadians. This division is nowhere more profound than in Quebec.
Quebec opposition to Energy East comes from every quarter and is concentrated along three axes:
- Canada and Quebec must fight climate change and prioritize de-carbonization. The pipeline will increase western Canadian oil production and related greenhouse gas emissions, thus making it more difficult for Canada to transition away from oil and meet its environmental objectives and international obligations.
- Pipeline accidents occur and big pipelines have big accidents. Energy East is projected to have a daily capacity of 1.1 million barrels, making it one of the largest pipelines in North America. Damage from spills will be amplified because Energy East is expected to cross more than 850 rivers and other bodies of water. An accident could therefore have serious consequences, including adversely affecting potable water sources.
- Quebec does not need the oil from Energy East. It is an export project that will produce little lasting economic benefit for Quebec and the 65 municipalities along the project’s path.
The Ontario government has introduced a carbon cap and trade regime expected to go live in January 2017. The cap and trade program will have real impacts for consumers and business. Click here to see a high level summary of the program with initial estimates of the costs. We are also available for consultation if you want to see how this program may impact your own business. We will continue to monitor the development of the program with practical insights for business.
On April 7, 2016, Premier Philippe Couillard and four of his ministers unveiled Quebec’s 2030 Energy Policy. As discussed in our April 8 overview post, this initiative is a “green” policy that sets ambitious de-carbonization goals.
The last chapter of the Policy deals with fossil fuels (pages 57 to 62). Page 58 refers to “social oil”. What is social oil? A quick search of the internet does not show prior uses in French or English. The expression appears to be the work of a clever government wordsmith.Continue Reading...
On April 7, 2016, the Government of Quebec released its much-anticipated Energy Policy 2030 before 500 guests at Montreal’s Place des Arts.
Since its election on April 7, 2014, Premier Philippe Couillard’s Liberal government has issued a steady stream of economic and industrial policies that would put dirigiste France to shame. In the last 18 months, it has issued policies, strategies, guides and papers on a broad range of subjects. To name only a few, these include the Maritime Strategy, the Quebec Aluminium Development Strategy 2015-2025, the Strategic Vision for Mining Development in Quebec, the 2013-2020 Action Plan on Climate Change, the Plan Nord toward 2035, 2015-2020 Action Plan, and the Green Paper on Social Acceptability.Continue Reading...
Prior to the federal budget of March 22, 2016 (Budget 2016), the tax treatment of emissions allowances was governed by general principles of income tax law. Budget 2016 proposes to introduce a specific regime that applies to emissions allowances.
Pursuant to Budget 2016, emissions allowances will be treated as inventory. However, due to the potential volatility in the value of such allowances, the allowances will not be subject to the “lower of cost or market” method for the valuation of inventory. Any free allowances received by a regulated emitter will not be included in income. The emitter will be entitled to a deduction for an accrued emissions obligation to the extent that the obligation exceeds the cost of any emissions allowances acquired by the emitter and used to settle the obligation. If a deduction is claimed in respect of an emissions obligation that accrues in one year (for example, 2017) and that will be satisfied in a subsequent year (for example, 2018), the amount of the deduction will be brought back into income in the subsequent taxation year (2018) and the taxpayer will be required to evaluate the deductible obligation again each year, until it is ultimately satisfied. The amount of the deduction will be equal to the cost of the emissions allowances acquired by the taxpayer and which can be used to settle the emissions obligation, plus the fair market value of any emissions allowances needed to full satisfy the obligationContinue Reading...
The following is an overview of key developments in Canadian public markets law applicable to the oil and gas industry from October 1, 2015 to December 31, 2015.
Mergers and Acquisitions
- In CB Gold, a target was subject to a hostile bid and subsequently agreed to a friendly deal which was combined with a placement of 4% of the target’s stock to the second bidder. The BCSC cease-traded the pre-bid rights plan so as to allow for a 72 day bid period, but did not offer a view on the propriety of the placement. The first bidder continues to acquire shares of the target.
- In Canadian Oil Sands, a target was subject to a hostile bid and adopted a rights plan. The ASC cease-traded the rights plan so as to allow for a 90-day bid period. The bidder extended and then reached a friendly deal with the target and completed the acquisition of the target
The following is an overview of key developments in Canadian law and regulatory practice applicable to private M&A in the oil and gas industry from October 1, 2015 to December 31, 2015.
Oil & Gas Regulatory
- Alberta’s Climate Change Advisory Panel released its report, calling for a carbon tax, oil sands emissions limits, phasing out coal-fired power plants and introducing an energy efficiency program. The provincial government adopted these recommendations, but offered few details on implementation.
In this post we will more closely examine the details of Ontario’s recently announced draft cap-and-trade system in combination with its counterparts in California and Quebec. You will recall that last year we suggested that Ontario's system would follow closely in the footsteps of the existing cap-and-trade systems found within California and Quebec. The link to the May 2015 piece can be found here.
As a result of Ontario’s desire to join the Western Climate Initiative (WCI) and the benefits of a harmonized approach to the salient details of a cap-and-trade system that Ontario would introduce with the programs in Quebec and California, we suggested that any proposed cap-and-trade system must follow the detailed policy architecture of the WCI and accordingly, would mimic to a large extent the content, scope and design of the systems within Quebec and California. We further hypothesized that, based on existing public disclosure, the Ontario government had already effectively committed to joining the WCI and the recently released details of the proposed Ontario system have confirmed our predictions to be accurate.Continue Reading...
Yesterday, the provincial government released its 2016 Ontario Budget and with it came the details of their much anticipated cap-and-trade plan. The plan, which will be governed by the Climate Change Mitigation and Low Carbon Economy Act, will be linked to existing cap-and-trade systems in Quebec and California under the Western Climate Initiative. The provincial government anticipates that the cap-and-trade plan will cover a broad range of industries, which, in aggregate, account for nearly 82 per cent of the province’s total emissions. The plan is expected to generate proceeds in excess of $1.8 billion through the sale of carbon allowances and is intended to do most of the heavy lifting necessary to enable Ontario meet its greenhouse gas reduction target of 37% below 1990 levels by 2030.
Details of the cap-and-trade plan can be parceled into three primary sections: the plan itself; the cost of the plan; and investment of the proceeds.Continue Reading...