Canadian Energy Law : Lawyers & Attorneys for Environmental Energy Law

The Federal Energy Regulatory Commission (“FERC”) is seeking feedback regarding recent developments in the field of electricity storage.

Electricity storage technologies like rare earth metal batteries, pumped hydro and pre-compressed gas turbines can increase the value of renewable assets, such as solar and wind, by making supply coincide with periods of peak consumer demand. For grid management purposes, electricity storage can also provide “ride-through” during outages, reduce harmonic distortions, and eliminate voltage sags and surges.

FERC is seeking stakeholder input regarding how FERC’s accounting and reporting requirements should account for the capital and operating costs associated with new electricity storage facilities.  FERC is also seeking guidance on the rate-setting treatment for facilities that serve multiple purposes, some in and some outside of FERC’s jurisdiction, as well as the regulatory implications of open-access electricity storage services.

Comments are due July 26, 2010.

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Lanette Wilkinson

On June 16, 2010, CSA Standards and the International Performance Assessment Centre for Geologic Storage of Carbon Dioxide (IPAC-CO2 Research Inc.) announced an agreement to develop Canada's first carbon capture and storage (CCS) standard for underground storage.

CCS is a process that involves the capture, transportation and injection of carbon dioxide emissions underground, which many believe is a promising technology to assist certain emissions-intensive industries to reduce CO₂ emissions. Several large-scale projects involving CCS have been announced in recent years in Saskatchewan, Alberta and British Columbia.

The proposed standard focuses primarily on long-term underground storage of CO₂. According to a representative of CSA Standards, the new standard will create guidelines for, and advance risk assessment expertise associated with, geological storage projects. As mentioned in our March post, risks associated with long-term storage include the reliability of injection and the effectiveness of ongoing monitoring and verification. In addition, the perpetual nature of storage also makes the siting of CCS important, including the specific geological characteristics of the proposed storage site and site-specific risks. The development of this standard represents an opportunity to promote careful site selection while also instilling public confidence in the reliability and safety of long-term storage and monitoring and verification. Ideally, the standard will contain important technical guidelines, while also remaining flexible enough to address site-specific characteristics, emerging technologies, and new information.

It is intended that the completed standard will be submitted to the Standards Council of Canada for recognition. If recognized, it could become the world's first formally recognized standard in underground storage.

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Lewis Smith

On June 4, 2010, the National Research Council announced a pilot project to develop a 50,000 litre cultivation plant to study the production of biofuels from algae. The plant is to be constructed at the NRC’s Marine Research Station in Ketch Harbour, Nova Scotia, where researchers have been growing algae for more than 50 years. The NRC’s algal biofuel initiative is notable for its use of local algae strains. These are expected to be easier to grow, since they are already adapted to the environment, and their use avoids the risks of unintended releases of foreign strains of algae.

Approximately $5 million was provided for the project by the Canadian federal government. The NRC is working on the development of algal biofuels with the United States Department of Energy, the National Renewable Energy Laboratory in Colorado and Sandia National Laboratories in New Mexico, as well as a Canadian private sector partner Carbon2Algae Solutions Inc. Carbon2Algae’s longer-term plan is to produce biofuels using algal bioreactors fed in part by carbon dioxide generated by emitters such as the Albertan oil sands and coal-fired electrical generating stations. 

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Mike Styczen

Syncrude was convicted in Alberta Provincial Court on June 25 on charges of failing to prevent a toxic substance from harming wildlife (a provincial charge under the Environmental Protection and Enhancement Act) and depositing a substance harmful to migratory birds (a federal charge under the Migratory Birds Convention Act).

Syncrude’s defence had been primarily based on due diligence - arguing that it had taken reasonable care to prevent the unlawful act.

The court found that, while a defence of due diligence was available on these charges, the court found that Syncrude had not acted with due diligence:

Syncrude could not "ensure" that waterfowl did not land on the Aurora Settling Basin on April 28, 2008 but it had a reasonable legal alternative. I am convinced beyond reasonable doubt that Syncrude could have acted lawfully by using due diligence to deter birds from the Basin, whether or not it was successful in its attempts at deterrence, and it did not do so.

With respect to the deployment of deterrence systems available to prevent ducks from landing on Syncrude’s pond, the Court found that:

The evidence convinces me beyond reasonable doubt that Syncrude placed itself in a position where it was unable to take reasonable steps to deter birds from the Aurora Settling Basin on April 28, 2008. It could have set up its system to place deterrents sooner and more quickly, regardless of the weather that arrived in April of 2008. It was reasonable to take those precautions and Syncrude did not.  It could have set up its system to place deterrents sooner and more quickly, regardless of the weather that arrived in April of 2008. It was reasonable to take those precautions and Syncrude did not.

Other defences raised by Syncrude (including that it would have been impossible for it to ensure that ducks would not land in the ponds, act of God, abuse of process and officially induced error were all rejected by the Court. .

The matter will resume on August 20th with arguments as to whether convictions should be entered on one or both charges, and for sentencing arguments.

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On June 21, 2010, Bill C-2, An Act to Implement the Free Trade Agreement between Canada and the Republic of Columbia, passed its third reading in the Senate. Upon royal assent the act will implement the Free Trade Agreement and the related agreements on the environment and labour cooperation entered into between Canada and the Republic of Colombia and signed at Lima, Peru on November 21, 2008.

The Canada-Columbia FTA will strengthen the investment ties between the two countries and advance the rights and protections for Canadian businesses that currently have, or that plan to make, investments in Columbia. The FTA provides for the free flow of capital to investments, protection against expropriation without compensation and requires Canadian investments and investors to receive fair and equitable treatment.

Because of its significant natural resources Columbia is an important investment destination for Canadian companies involved in mining and oil exploration. Speaking at an auction of oil exploration and production blocks the Energy and Mining Minister of Columbia, Hernan Martinez, stated that the Canada-Colombia FTA “opens the way for a lot of opportunities” for Canadian oil companies. 

Columbia is South America’s forth largest oil producer and is in the process of auctioning off more than 200 exploration and production blocks in a process that could bring in between $250 and $500 million dollars.

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On June 23, 2010, the federal Minister of the Environment, the Honourable Jim Prentice, announced that in keeping with its commitments under the Copenhagen Accord to reduce GHG emissions by 17 percent below 2005 levels by 2020, the federal government will soon introduce legislation to regulate GHG emission in the electricity sector by applying performance standards to coal-fired electricity generation units.

Prentice announced that draft regulations to reduce GHGs from the electricity sector are expected to be published in Canada Gazette early in 2011 and final regulations will be published later that year. The proposed regulations will apply a stringent performance standard to new coal-fired electricity generation units and those coal-fired units that have reached the end of their economic life. 

Said Prentice, "Our regulation will be very clear — when each coal-burning unit reaches the end of its economic life, it will have to meet the new standards or close down," he said. "No trading, no offsets, no credits."

The proposed regulation may represent a shift in government policy, as the government has previously stated that it would coordinate emission reduction plans with U.S. legislation. 

Prentice also announced that the Government of Canada will invest $400 million in international climate change initiatives for the poorest and most vulnerable countries. This investment represents the 2010 portion of Canada's share of the fast-start financing promised by developed countries under the Copenhagen Accord.

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Australia will stay committed to its goal of generating 20% of the nation’s energy from renewable resources, despite proposed amendments to legislation. 

The country’s Renewable Energy Target Scheme (RET) will consist of two parts: support for households using solar panels and solar hot water systems, and the development of wind farms, commercial solar and geothermal projects. Australia expects that the second part of the plan will help the country reach its renewable energy target by 2020.

Other amendments to Australia’s renewable energy laws include increasing the country’s target in the years 2012-13 with subsequent modifications. Regulatory powers will also be granted for the adjustment of solar panel credits and for reviewing the price of renewable energy certificates. 

Climate Change Minister Penny Wong has noted that the legislation and its amendments are “imperative for the ongoing growth of the renewables sector.” 

The amended legislation is expected to come into effect on January 1, 2011.

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PG&E Corporation has established a $100 million tax-equity fund to finance residential solar installations by SunRun, a start-up company that leases photovoltaic arrays to homeowners.

On June 16, 2010, Alaska adopted a new law that sets a target of generating half of the state’s electricity from renewable sources.   The new legislation – formerly known as House Bill 306 – does not contain details on how Alaska will achieve this goal.  Nevertheless, the state expects that hydroelectric projects will help the state realize its target by 2025.  The legislation marks the highest goal for renewable power amongst any of the US states, beating out California and Hawaii, which have set its targets at 33% and 40%, respectively. 

Alaska also passedSenate Bill 220 into law, which provides a $250 million financing scheme for energy efficiency projects.  The scheme, run by the Alaska Housing and Financing Corporation, will supply funds for improving public structures, such as schools, government buildings, and the University of Alaska.   State buildings will first be evaluated for energy efficiency.  Alaska will then begin improvement projects starting with the most inefficient structures.  These projects will be scheduled for completion by 2020.  Finally, the new legislation establishes an Emerging Energy Technology Fund.  This fund offers grants for technological projects that are predicted to be commercially viable within five years.

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Patrick Duffy

On April 22, 2010, the Ontario legislature passed Bill 235, which when it comes into force will create a new Energy Consumer Protection Act and amend the Electricity Act, 1998. The principal aim of the legislation is to enhance consumer protection and energy conservation through new rules for gas marketers, electricity retailers, landlords, and condominium developers.

The new legislation sets the framework for increasing the use of smart meters by individual units in multi-residential buildings (referred to as "suite metering"). According to the Minister of Energy and Infrastructure, empirical data indicates that energy consumption drops between 12%-22% when unit owners are responsible for personal power bills. The legislation will enable the government to provide guidance on suite metering, and also addresses concerns related to suite meter companies and tenant rights.

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Glenn Zacher

In a decision released on June 3, 2010, the Ontario Court of Appeal upheld orders of the Ontario Energy Board and the Divisional Court that deny Great Lakes Power (GLP) recovery of approximately $15 million from its customers because the underlying costs had not been subject to a prudency review.

The appeal related to a portion of GLP's revenue requirement that had been voluntarily deferred between 2002 and 2007 to avoid rate shock to its customers.  The underlying costs did not undergo a full prudency review by the Board because of the "rate freeze" implemented by Bill 210 in 2002.  GLP refused to submit to a prudency review when it sought recovery of these amounts in its 2007 rate application.  GLP argued that the Board had approved the costs in a 2002 interim order and was foreclosed from revisiting those costs by Bill 210.  The Board disagreed with GLP's interpretation of the 2002 interim order and denied recovery in the absence of a prudency review.  The Board's decision was affirmed by the Divisional Court in July 2009. A full description of the case appeared in the August 2009 edition of our Energy Update. 

In affirming the decisions of the Board and Divisional Court, the Court of Appeal ruled that the Board is entitled to deference when interpreting its own orders as that task calls upon the Board's expertise and policy considerations.  Further, the Court agreed that the costs at issue were not approved by the 2002 interim order and could not be recovered in the absence of a prudency review by the Board.  In dismissing GLP's pleas that the result was unfair, the Court noted that GLP was ignoring those parts of Bill 210 that allowed for a prudency review of the deferred amounts and had "made a conscious decision to forego a prudency review" in its 2007 application.

Glenn Zacher and Patrick Duffy represented the Ontario Energy Board before the Divisional Court and the Court of Appeal.

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Lisa McDowell

As reported in prior posts (most recently in April 2010), in 2009 the Alberta Government launched a competitiveness review of the 'New Royalty Framework' implemented by the Stelmach government only two years earlier. The results of that review, along with the Government of Alberta's policy response, were released in March, 2010 and the corresponding new royalty curves were to be provided prior to June, 2010.

As promised, on May 27, 2010, the Government of Alberta revealed its proposed changes to the base royalty curves for both conventional oil and gas, which are to take effect on January 1, 2011. The government also unveiled further initiatives, as a result of the competiveness review, intended to energize investment and encourage development of Alberta's unconventional and deep resource pools. The most significant of these initiatives are modifications to the Natural Gas Deep Drilling Program and the implementation of the Emerging Resources and Technologies Initiative.

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Alison Forbes

As of the end of May, project developers who had previously installed and connected in-series renewable generation projects under the FIT and microFIT programs still do not know the future of their projects.  While the current official position of the Ontario Power Authority (OPA) is that it will continue to work with the necessary regulatory bodies, including the Ontario Energy Board (OEB) and Measurement Canada, and local distribution companies (LDCs) to address systems already connected, the OEB has now directed all LDCs to stop connecting facilities using in-series meters and the OPA FIT and microFIT rules have been amended to prohibit behind-the-meter, in-series facilities.

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Jason Streicher

On June 2, 2010, Quebec's Ministry of Sustainable Development, Environment and Parks announced that it has published, for a 60-day public consultation, amendments to the Regulation Respecting Mandatory Reporting of Certain Emissions of Contaminants into the Atmosphere (the Regulation). The amendments are meant to harmonize the Regulation with the common policies adopted by the members of the Western Climate Initiative (the WCI). The partners of the WCI are comprised of 7 U.S. states, including California, and four Canadian provinces, namely British Columbia, Manitoba, Ontario and Quebec.

The current Regulation sets the greenhouse gas (GHG) emissions reporting threshold at 50,000 tons of carbon dioxide (CO2) equivalent per year. The amended Regulation would lower the threshold and require reports be provided by Quebec enterprises that have emissions of 10,000 tons of CO2 equivalent per year or more. If enacted, the amended Regulation would also prescribe the methods to be used to quantify emissions and would require emitters of more than 25,000 tons of CO2 equivalent per year to have their emission reports verified by an accredited organization.

 

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