The Future of the Oil Sands: Reports of its Demise are Premature

Glenn Cameron, Jonathan Drance and Stephen Wintermute

The oil sands have played a vital role in the Canadian economy for the past twenty-five years. Recent geo-political developments both at home and abroad, however, have led many to speculate whether Canada’s oil sands will continue to be viable. Some have even suggested that the oil era is nearing its end, particularly given the current, proposed and foreseeable limitations on carbon emissions.  

Recent studies have undertaken the difficult task of forecasting what the future holds for the oil industry. In Canada’s Energy Future 2016 (initially published in January 2016 and then updated in October), Canada’s National Energy Board (the NEB) projects the future prices for and production of Canada’s oil resources during the period from 2016 until 2040 (the Projection Period). ExxonMobil has also completed its Outlook for Energy which forecasts global energy demand to 2040. In addition, the International Energy Agency (the IEA) has released its 2016 World Energy Outlook.  These studies all project that the global demand for oil will continue to grow, led by key emerging economies. They also suggest that Canada’s oil sands will be in position to play a material role in meeting this growing demand. 

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Alberta's Ambitious Renewable Electricity Program: The Long-Awaited and Eagerly-Anticipated Details Unveiled

Allison Sears and Vincent Light - 

Almost a year after Alberta Premier Notley first announced her Climate Leadership Plan in bold but extraordinarily broad strokes, the details of how she hopes to achieve a target of 30% renewables on Alberta’s grid by 2030 are finally taking shape.

Coincident with the first reading of Bill 27 - Renewable Electricity Act in the Alberta Legislature, Environment Minister Shannon Phillips and Mr. Mike Law, the VP of Renewables Development and Sustainability at the Alberta Electric System Operator (AESO), each gave presentations at the Canadian Wind Energy Association (CanWEA) annual conference (auspiciously held in Calgary this year) revealing aspects of Alberta’s Renewable Electricity Program (REP). 

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Live Long and Prosper: Vulcan Solar Project Receives Quick Approval from Alberta Utilities Commission

Vincent Light -

The Alberta Utilities Commission (“Commission”) approved the EDF EN Canada Inc. (“EDF”) 77.5 megawatt Vulcan Solar Project on October 25, 2016 in Decision 21897-D01-2016. This is only the second utility-scale solar generation project to be approved by the Commission [1]  and is one of about twenty proposed projects that would collectively bring approximately 581 megawatts of new solar power into production, according to the Alberta Electric System Operator’s system access service request list. [2]

One notable aspect of the approval is the short time frame in which EDF obtained its approval – a mere 83 days. The efficiency and timeliness of the Commission’s approval is likely attributable, in part, to the co-location of the Vulcan Solar Project with EDF’s existing 300 megawatt Blackspring Ridge Wind Project, as there were no objections raised to the development of the project adjacent to existing facilities.

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Determining the Effective Price of Carbon

Jonathan Drance, Jason Kroft and Luke Sinclair - 

Background to Canada’s National Carbon Policy

The recent federal plan for a national Canadian carbon price – rising to $50/+ CO2e by 2022 – has increased interest in carbon pricing policies and has highlighted the need to go beyond an initial headline number to determine the effective price of carbon. In light of a forthcoming national price on carbon, business, individuals and government must understand the “all-in costs” associated with carbon pricing in order to make sound strategic decisions. Our federal government should be mindful of the different ways in which a carbon price may impact the different regions of Canada and how different carbon levels may impact consumer and business behavior in different regions of Canada.

Ecofiscal Commission Report

Canada's Ecofiscal Commission has issued a timely report – which raises questions about the complexity, transparency and fungibility of carbon pricing policies. The Commission suggests looking beyond the headline number in order to determine the collective price imposed under a proposed carbon tax or a cap-and-trade emissions trading system (ETS).

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A big step toward public confidence in federally regulated pipelines: Canada's proposed financial requirements unveiled

Vincent Light and Allison Sears - 

With the publication of the Pipeline Financial Requirements Regulations in Part I of the Canada Gazette on September 29, 2016, the federal government provided pipeline companies a first glimpse at the absolute liability (i.e. liability without proof of fault or negligence) regulatory regime first set out in the Pipeline Safety Act, SC 2015, c. 21 (PSA), which amended the National Energy Board Act, RSC 1985, c. N-7 (NEBA).

The PSA, which came into force on June 19, 2016, provided the National Energy Board (NEB) with jurisdiction over pipelines post-abandonment, and provided the NEB with powers to assume control of pipelines in the event of a release. The PSA also established a limit of liability without proof of fault or negligence of $1 billion for pipelines carrying at least 250,000 barrels of oil per day. Determination of absolute liability limits for all other pipelines was, however, left to be prescribed by regulation. 

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Pan-Canadian Carbon Plan

Jason Kroft, Jonathan Drance and Luke Sinclair - 

What does it mean for you 

As of January 2018, all Canadians will be paying a price for carbon.

The Announcement

After much anticipation, Justin Trudeau recently announced that Canada would implement a national price on carbon by 2018. The announcement was met with significant media fanfare and a touch of provincial dramatics, but a closer look reveals that Trudeau’s carbon plan may uncover more questions than answers.

The following will highlight what we know and, almost as importantly, what we don’t know about Trudeau’s Pan-Canadian Approach to Pricing Carbon Pollution (the Plan).

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Climate file update

Jason Kroft and Luke Sinclair - 

These continue to be busy times for those interested in the business and policy of carbon in Canada and elsewhere.  Below is a snapshot of some recent developments of note.

NY Climate Week

This week marks the eighth annual climate week in New York City and government officials, academics, industry representatives and other interested parties are meeting to discuss the global transition to a “low-carbon” economy. In the past, the rhetoric around climate change has often been muted. However, the recent ratification of the December, 2015 UN Paris Agreement on climate change matters by both the U.S. and China has brought climate change and in particular, the issue of carbon pricing, into the forefront of both government and industry discourse. The general acceptance of some type of carbon pricing scheme has transformed the key question from “will there be a price on carbon?” to “what will the price on carbon be?” This question of the level or quantum of carbon price will be a central item in the debates in Canada for the months and years to come.

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Package and Bump transactions not subject to GAAR

Kevin Guenther

When BPC Properties Ltd. (BPC) and Oxford Properties Inc. (Oxford) entered into an agreement relating to the sale of Oxford to BPC in August 2001, Oxford agreed to complete a pre-closing reorganization of its business.  Oxford dropped various properties down into several limited partnerships on a tax deferred basis by utilizing subsection 97(2) of the Income Tax Act (Canada) (the ITA), with those partnership interests subsequently being bumped under paragraph 88(1)(d) of the ITA.

After the completion of the purchase and sale transaction, BPC completed a second bump by transferring certain bumped interests into newly formed property-specific limited partnerships, and subsequently wound-up the upper-tier limited partnerships under subsection 98(3) of the ITA, using the bump rules in paragraph 98(3)(c) of the ITA.

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Recent hybrid debt offerings of $1.2B by Canadian issuers

Doug Richardson and Julie D’Avignon - 

The recent offerings by TransCanada Trust and Emera Incorporated of U.S. $1.2 billion of hybrid debt (Hybrid) have created particular interest in this type of financing.  Hybrids are noteworthy for several reasons, including:

  • Hybrids have been around for many years and were originally popular with banks and insurance companies.  Regulatory changes arising from the financial crisis of 2008 and other factors have curtailed the use of Hybrids in the financial sector.  However, Hybrids remain attractive for many types of issuers.
     
  • The Hybrid qualifies for Basket “C” equity treatment by Moody’s Investor Service, Inc. and for “Intermediate Equity Credit” by Standard & Poor’s Ratings Services, meaning the principal amount of the Hybrid qualifies as 50% equity and 50% debt for credit rating calculations.  Therefore, Hybrids are especially attractive to issuers seeking to maintain their investment grade rating.
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Cap and Trade in Ontario - Avoiding the EU's Pitfalls

 P. Jason Kroft and Sam Dukesz - 

The European Union Emission Trading System (EU ETS) is the world’s largest cap and trade system, covering all countries in the European Union. It is also one of the world’s most troubled, as it has largely failed to live up the expectations of emissions reductions that it was initially touted to bring about. This blog post analyzes the impediments to the success of EU ETS, and then provides a forward-looking analysis of the applicability of those impediments to the proposed Ontario cap and trade program. 

A Snapshot of the EU ETS: Program Design and Implementation Problems

The EU ETS was initially implemented in phases, with a pilot Phase I from 2005-2007, followed by a Kyoto Phase II from 2008-2012 and a number of subsequent phases. The initial system covered approximately half of EU CO2 emissions across 31 EU countries. The system was limited to certain sectors, as many sectors, such as transportation, were exempted because of concerns about competitiveness with non-participating jurisdictions. 

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