Canadian Energy Law : Lawyers & Attorneys for Environmental Energy Law

Erik Richer La Flèche -

Quebec has a well-deserved reputation for excellence in hydro-electricity. Less well known is its potential as an oil producer. The province is home to at least three likely production zones: Gaspe Peninsula, Gulf of Saint Lawrence and Anticosti Island. Aside from the basic question of whether there is sufficient recoverable oil, there are five other conditions that must be satisfied before Quebec can become an oil producer.

Below is a look at each condition, and its current status.

1. Oil. It has long been known that there is some oil on the Gaspe Peninsula; but it is in the Gulf of Saint Lawrence and on Anticosti Island that very large quantities are thought to be recoverable thanks to newer techniques. Further exploration work is required in all three zones to confirm reserves. Status: More work required.

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Michael Nilevsky -

On May 6, 2012, Ontario’s Minister of Energy, Bob Chiarelli, sent a letter to both the Ontario Power Authority (OPA) and the Independent Electricity System Operator (IESO) requesting that both organizations work together to develop recommendations for a new integrated regional energy planning process. Ontario’s new government is hoping to improve the way in which large energy projects are planned, sited and built across the province and hopes that these two entities can provide recommendations that will help Ontario build energy infrastructure through a process that will have formal inputs from municipalities, Aboriginal communities, other stakeholders in the development process and the energy sector. The OPA and the IESO are expected to report back to the Minister with their recommendations by August 1, 2013. The Minister has specifically requested that the report contain details on how to “implement regional energy plans, including: suggested consultations, required policy and regulatory changes, as well as implementation timelines.”

The full details of the request can be found here. Stay tuned to this blog as well will continue to provide updates as this story develops.

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Susan Hutton and Eric Bremermann -

As an update to our previous post, the World Trade Organization (WTO) has released its official ruling on Canada’s Appeal regarding Ontario’s Green Energy Act and its Feed-in Tariff (FIT) program. On Monday May 6, the WTO Appellate Body upheld the complaints from the European Union (EU) and Japan, stating that Ontario’s Feed-in Tariff (FIT) program discriminates against foreign suppliers of equipment and components for renewable energy facilities by requiring minimum thresholds for domestic content levels, and is not saved as government procurement.

To quickly summarize the claim, the EU and Japan first appealed to the WTO in 2011 claiming that the FIT program violated three WTO conventions: Article III:4 of the General Agreement on Tariffs and Trade; Article 2.1 of the Trade-Related Investment Measures Agreement; and Articles 3.1(b) and 3.2 of the Subsidies and Countervailing Measures Agreement (SCM). Specifically, Japan and the EU argued that the domestic content rules under the FIT program treat imported products less favourably than domestic ones and therefore violate the “national treatment” obligations under the General Agreement on Tariffs and Trade (GATT) and Trade-Related Investment Measures Agreement (TRIM). The complainants also argued that the programs constituted actionable subsidies under the SCM. The initial decision, released in December 2012, found the FIT program contravened GATT and TRIM but that the complainants had failed to show the program constituted a subsidy as defined in the SCM. Canada appealed the decision in February 2013 but in its May 6 report the WTO Appellate Body dismissed the appeal.

What this means for the Ontario’s Green Energy Act is yet to be determined. “As this is the first time Canada has received a WTO panel ruling arising solely from provincial policy or legislation, we will work with the Ontario government in order to respond to the decision,” said a Department of Foreign Affairs and International Trade spokeswoman. However, in formal terms, the WTO decision is not-binding on Ontario. The province plans to the review the ruling in consultation with the federal government before the next steps are determined.

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Monique Alicandri -

The media reported yesterday that the European Parliament has rejected an attempt to raise the costs of emitting greenhouse gases in a contentious 334-315 vote. Siding with opponents of increased energy costs, Members voted down a measure that would have temporarily cut a large surplus of carbon allowances currently being traded. The BBC reports that the price of carbon on the EU Emissions Trading Scheme has since plunged to less than 5 euros a tonne.

Given that energy prices are already significantly higher in Europe than in North America, the decision protected European manufacturers who would have been at an even greater disadvantage to their counterparts in the United States and Canada had the measure been passed. However, there is concern that the European Parliament’s decision will give ammunition to critics of carbon trading systems in other parts of the world including Canada.

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Last week, California Governor Jerry Brown approved the link of the state’s carbon market with Quebec. The next step is for California’s Air Resources Board to consider changes to its cap-and-trade program that will allow it to link with Quebec. The Board is scheduled to meet on April 19^th. A spokesman has stated that the Board intends to continue to work on all necessary additional steps to ensure California’s efforts to link with Quebec are successful.

If approved by the Board, California and Quebec intend to implement the link between their carbon markets on January 1, 2014. Once linked, they will hold joint auctions of carbon emission allowances which can be used for compliance in either jurisdiction. In the interim, the two jurisdictions will test their auction platforms and trading systems for compatibility.

Both governments are hopeful that linking the carbon markets will improve liquidity for carbon allowances by increasing the pool of permits and companies trading them, as well as encourage expanded investments in low-carbon technologies.

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Erik Richer La Flèche -

Alberta, and by extension Canada, is learning a lesson Quebec learned the hard way 20 years ago.

U.S. opposition to the Keystone XL oil pipeline has been galvanized by less than favourable attention on Canada’s recent environmental record and the manner in which Alberta’s tar sands are exploited. The same is somewhat true in British Columbia and Quebec, where there is opposition to new pipeline routes from Alberta to the Pacific and the Atlantic, respectively.

If Albertan oil cannot be exported, then it will be stranded and its price heavily discounted. This will not just affect oil producers, but also Alberta’s finances and the Canadian economy as a whole.

It threatens to be Alberta’s Great Whale.

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Andrew Sullivan -

On April 15, 2013, the Office of the Auditor General of Ontario (AGO) released its highly anticipated special report (the Report) on the Ontario government’s decision to cancel and relocate the Greenfield South Power Plant. The proposed 280 MW gas plant had been under construction for nearly six months when it was cancelled in late 2011 and subsequently relocated from Mississauga to Sarnia.

The decision is estimated to have cost approximately $275 million according to the Report. The gross cost is estimated to have been as high as $351 million when considering the cancellation and relocation costs in isolation. However, the AGO attributes a $76 million savings in association with the relocated plant's lower electricity prices and delayed construction schedule that better matches Ontario's electricity demand forecast. Of the $275 million, the AGO estimates that $190 million is being paid by Ontario taxpayers with the balance being paid by electricity ratepayers.

Among the key findings, the Report states that the decision to cancel the plant during construction weakened the Ontario Power Authority’s bargaining power and likely resulted in higher costs due to concessions made to the developer to halt construction.

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On March 27, 2013 the National Energy Board (the Board) provided their ruling on TransCanada’s application to revise the toll structure for TransCanada’s mainline pipeline. According to the Board’s decision, the new “multi-year fixed tolls are competitive and provide TransCanada with a reasonable opportunity to recover its mainline costs, given the increase in mainline throughput that is forecast”. In the short term, the Board’s decision has the effect of significantly decreasing the transportation toll from Empress, Alberta, to Dawn, Ontario, to $1.42 per gigajoule as opposed to $2.58 per gigajoule for 2013 had the Board not made changes to the tolling structure. The tolls are expected to remain in effect through 2017. In their decision, the Board noted that the Mainline faces challenges but “tolls cannot continue to increase each year in response to throughput decline”. The Board did approve some elements of TransCanada’s proposal giving TransCanada some flexibility in allocating costs on the Mainline and increasing the rate of return that it could earn should higher throughput on the Mainline be achieved.

Historically, the Mainline system once carried as much as 6 billion cubic feet of natural gas per day. However, increasing gas production from the Eastern United States, from supplies such as the Marcellus shale field in Pennsylvania, have resulted in decreasing throughput on the Mainline resulting in increasing tolls for shippers on the line. The decision comes more than 18 months after TransCanada first asked the Board to reconsider the tolling structure on the Mainline.

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On March 22, 2013, the Ontario Power Authority (OPA) posted an amendment to the Feed-in Tariff (FIT) Contract. Specifically, the OPA has amended Exhibit C of the FIT contract which deals with the domestic content requirements. In the new contract (version 2.1.1), Table 1, Activity #11 (On-Shore Wind Turbine Towers) has been amended to allow for a mutually exclusive option for wind tower raw materials. The new domestic content option reads as follows:
 

“All steel that was formed and shaped into steel tower sections, if any, was processed into steel plates in a steel mill in Ontario; and

All steel for rebar for concrete tower sections, if any, must have been rolled or extruded in a steel mill in Ontario. Aggregate materials used in concrete tower sections, if any, must be sourced and mixed in Ontario, and the Portland cement used in the concrete tower sections, if any, must have been manufactured in Ontario.

The foundation of a tower is not considered part of the tower for the purposes of this Designated Activity 11.”

A link to a comparison of the new contract to version 2.1 can be found here. 
 

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