Ontario Power Authority directed to enter into biomass arrangement at Atikokan

The Ontario Power Authority has been directed to enter an agreement to purchase biomass power that will be produced at the Ontario Power Generation’s Atikokan station starting in 2012.

This development is part of the OPA’s 20-year plan that began in 2007, and proposed that the province phase-out coal-based electricity by 2014 and invest approximately $14.6 billion in renewable energy sources. Pursuant to Ontario Environmental Protection Act regulations made under the OPA plan, the Atikokan station is one of several coal facilities that will cease coal-fired steam electricity generation. 

However, unlike the Lambton and Nanticoke stations that will be permanently decommissioned, OPG will convert the Atikokan station to use wood pellets as a biomass fuel source.

Frank Chiarotto, OPG’s Senior Vice-President (Thermal), acknowledged the benefit to the community by converting the Atikokan station, as opposed to shutting its doors.

Atikokan can provide Ontario with a new source of renewable energy and Northwestern Ontario with economic benefits for years to come ... This is good news for OPG, Northwestern Ontario and the province.

Alberta decision interprets meaning of "producible" in petroleum and natural gas leases

In Bearspaw Petroleum Ltd v. Encana Corp., the Alberta Court of Queen’s Bench considered an action by a lessee seeking a declaration that it had subsisting rights under a petroleum and natural gas lease, in response to a termination of lease notice delivered by the lessor. The lease, executed in 1960 by the predecessors of both the lessor and lessee, granted the lessee an interest in the petroleum, natural gas, and other related hydrocarbons, in the mineral lands of the lessor. The term of the lease was 10 years “and so long thereafter as the leased substances or any of them are producible from the leased area.”

At the time the termination of lease notice was delivered in 2005, no leased substances had been produced or taken to market since September 2003. However, the lessor had two wells drilled which were considered viable but had not yet been tied into a pipeline. The lessor claimed the lease had terminated for lack of “producible” leased substances because the contents of the wells could not be immediately taken to market and sold. The lessee argued that “producible” meant capable of being produced in economic quantities and did not require actual production.

In finding in favour of the lessee, the Court considered the proper interpretation of “producible” within the meaning of the lease:

Producible does not mean that the product must be able to go to market without anything more to be done. A successful well remains producible in plain language even though the actual flow of gas to market awaits regulatory approval, well-head completion or contractual arrangements with carriers. When, after a well is drilled, leased substances are found in economic quantities, those substances are capable of being produced when other things are done - that is, they are “producible”.

The lease also contained a provision for the payment of yearly rent, in lieu of royalties, during periods in which no leased substances were being produced. This provision served as persuasive evidence for the Court that the continuation of the lease was contemplated in the absence of actual production. The lease continued by reason of leased substances being producible from the well in question and the annual rents being paid to the lessor.

An alternate argument of the lessor, that the lessee had breached an implied covenant to diligently produce and market any leased substances capable of production, was also dismissed. The Court found that there is no implied covenant where, as in the lease in question, production and marketing are expressly considered. The express covenant to develop the property so as to produce leased substances in paying quantities did not impose a timeline for such production. The lessee was entitled to postpone tying the wells to a pipeline until production was more economically viable. The Court also found it reasonable for the lessee to delay production while the legal status of the lease was in question. 

White House releases report on Minerals Management Service's offshore permitting policies

The White House Council on Environmental Quality (“CEQ”) released a report which reviewed the permitting policies of the federal agency responsible for oil and gas offshore leases.

Under the National Environmental Policy Act (“NEPA”), all federal agencies must consider the environmental impacts of their proposed actions, and follow NEPA implementation Regulations created by the CEQ.

NEPA procedures may include:

  1. An Environmental Assessment (“EA”) to determine whether an Environmental Impact Statement is necessary;
  2. An Environmental Impact Statement (“EIS”) for proposed actions that may create significant environmental impacts; or
  3. A Categorical Exclusion (“CE“) for activities that are determined through a public process not to raise environmental issues or concerns which would require analysis in an EA or an EIS.

The CEQ’s NEPA Regulations allows agencies to “tier” their analyses by “incorporating by reference” information, findings, and recommendations from existing studies into subsequent NEPA analyses and documents.

The Minerals Management Service, recently renamed the Bureau of Ocean Energy Management, Regulation and Enforcement (“BOEM”), relies on “tiering” in the approval of offshore drilling Exploration Plans.

The Minerals Management Service uses the analysis performed at the leasing program level to carry the information forward to the individual lease-level. Since the Deepwater Horizon incident, the CEQ report now recommends that the BOEM refrain from tiering in a way that limits site-specific analysis, “despite the availability of major, prior environmental reviews and studies.”

The CEQ report also recommends the BOEM review the use of CEs for offshore Exploration Plans. Establishing a CE requires that a categorized action has neither individual nor cumulative significant effects on the environment, and that there are no extraordinary circumstances which would preclude the use of a CE.

Going forward, the BOEM will review its interpretation of the threshold requirement for “extraordinary circumstances,” which will likely lead to an increase in the number of leases that are subject to additional environmental reviews prior to approval.

To accommodate the increase in EAs and EISs, the CEQ also seeks to amend the Outer Continental Shield Lands Act to provide more time for the BOEM to conduct environmental reviews. Currently, the BOEM must make its decision whether to approve a submitted Exploration Plan within 30 days.

OPA posts finalized pricing for ground-mounted solar PV microFIT projects and updates to the FIT Program

Over the last week, the OPA has posted the following amendments and updates to the FIT Program to its website:

  • Price category for ground-mounted solar PV microFIT projects finalized

On August 13, 2010, the OPA announced that it finalized the 64.2 cents per kWh price category for ground-mounted solar PV microFIT projects.  The revised price applies to all microFIT ground-mounted solar applications submitted after 12 p.m. on July 2, 2010.  In addition to changes to the contract price, the OPA has announced that:

(1) commercial aggregators that lease land or rooftops from individuals for multiple renewable energy projects will no longer be able to participate in the microFIT program;

(2) the OPA will be setting up a microFIT advisory panel to provide advice on the evolution of the microFIT program; and

(3) the advisory panel will be charged with making recommendations regarding the appropriate contract provisions that should apply to aggregators (outside the microFIT program).

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CIPO proposes amendments to spur green technology

In order to promote innovation in green technologies and help spur the development the green sector of Canada’s economy, the Canadian Intellectual Property Office(“CIPO”) has proposed amendments to the Patent Rules to accelerate the examination of green technology patent applications.

Currently, under the Patent Rules, the commissioner of patents has the authority to expedite the examination of an application upon request and payment of a fee. CIPO proposes to expand this authority by including a mechanism to accelerate the examination of patent applications related to green technologies. Under CIPO’s proposal, no fees would be required in order to advance the examination of eligible patent applications related to green technologies. Rather, in order to be granted access to the expedited examination service, the applicant would have to submit a declaration stating that their application relates to technology that if commercialized, could help resolve or mitigate environmental impacts or conserve natural resources.

CIPO’s proposal appears to be good news for green technology and green energy businesses that are actively engaging in research and development in Canada. Earlier patenting should result in benefits such as the earlier availability of financing and earlier access to patent enforcement steps. These benefits should in turn help ensure that environmentally beneficial products get to the market more rapidly.

If the proposal is accepted, Canada will join the United States in providing accelerated examination of green technology patent applications. The United States Patent and Trademark Office has had a green technology pilot program in place to accelerate green technology patent applications since December 2009. 

CIPO’s proposal will be recommended for publication for a 30-day consultation period in the Canada Gazette, Part I in fall of '10.

U.S. EPA's GHG regulations take effect in 2011, amidst growing legal challenges

In April, Senators John Kerry, Joseph Lieberman and Lindsay Graham announced their intention to pass legislation pre-empting the Environmental Protection Agency’s (“EPA”) regulation of greenhouse gases. 

However, since the recent abandonment of a Congress Energy Bill, the EPA’s regulations for stationary sources of greenhouse gas (“GHG”) emissions and new standards for light-duty vehicles remain scheduled to take effect on January 2, 2011.

The vehicle rules will apply to new passenger cars, light-duty trucks, and medium-duty passenger vehicles from model years 2012 to 2016, and will require these vehicles to meet an estimated combined average emissions level of 250 grams of carbon dioxide per mile in model year 2016. Automakers may meet these standards through improvements in fuel economy or air conditioning systems.

The auto industry is not expected to mount significant challenges to these rules, as it is speculated that the terms of the regulation were negotiated when loans were committed to the auto industry from funds from The Emergency Economic Stabilization Act of 2008.

On the other hand, the EPA’s regulation for stationary sources has prompted various proposed Bills in Congress seeking to restrict the EPA’s ability to regulate GHGs, as well as court challenges, most notably a lawsuit mounted by Texas Governor Rick Perry in the U.S. Circuit Court of Appeals.

The EPA’s stationary source regulation will operate under the Clean Air Act’s New Source Review Prevention of Significant Deterioration (“PSD“) and Title V Operating Permit (“Title V“) programs. Under these programs, industrial stationary source emitters who produce emissions above a set threshold are required to determine the Best Available Control Technologies (“BACT”) to limit their emissions. 

Prior to the EPA’s Endangerment Finding that determined that six established GHGs are “air pollutants” as defined by the Clean Air Act, the PSD and Title V programs applied only to criteria pollutants like lead, sulphur dioxide and nitrogen dioxide. The emissions thresholds for criteria pollutants are 100 and 250 tonnes per year, depending on the pollutant. 

For GHGs, the EPA has “tailored” the thresholds to be 75,000 and 100,000 tonnes per year of CO2 equivalent, depending on whether the facility is a new construction application or an existing facility undergoing modifications. Additional conditions apply as the EPA’s regulation will be enacted in two phases: one phase starting in January 2 to June 30, 2011; and the next phase, from July 1, 2011 to June 30, 2013.

At the heart of Governor Perry’s challenge is that the EPA does not have the authority to “tailor” the emissions thresholds set by the Clean Air Act. Governor Perry has also stated that in January, Texas will not comply with the stationary source regulations. Nevertheless, the White House Office of Management and Budget is reviewing an EPA rule that would allow the agency to install federal implementation plans if States do not comply with the regulations.

Saskatchewan to Release Draft Offset Program Plan

Saskatchewan is continuing to move forward with its proposed greenhouse gas (GHG) cap-and-trade program, with draft offset program methodologies expected to be released next month. The guidance documents will supplement the previously released draft regulations – The Management and Reduction of Greenhouse Gases Regulations– which are expected to gain final approval in fall 2010.

Saskatchewan has set a target of reducing GHG emissions to 20% below 2006 levels by 2020. The proposed emissions threshold for regulated emitters is 50,000 tonnes of CO2 equivalent in any year, and regulated emitters will be required to reduce emissions by 2% per year from 2010 to 2019 to meet the 20% reduction goal.

Regulated emitters will be able to purchase offset credits created from activities that have reduced and sequestered GHG in Saskatchewan and that occurred after January 1, 2006. In addition to offset credits, regulated emitters can make so-called “carbon compliance payments” to the Saskatchewan Technology Fund Corporation. Proceeds from this fund will be used to invest in GHG reduction initiatives and research.

The proposed Saskatchewan GHG cap-and-trade program is similar to that of Alberta, where the emissions threshold for regulation is higher at 100,000 tonnes of CO2 equivalent. In response to stakeholder comments regarding liquidity of the markets, the two provinces are considering linking their carbon trading programs.

Alberta ERCB releases 2009 summary report

A recent survey conducted by the Alberta Energy Resources Conservation Board reveals that public satisfaction with the regulator has declined over the past year. 

Only 68 percent of people who reported a complaint to the board were happy with the way their dispute was resolved. 

Darin Barter, a spokesman for the board, admits that the figure represents a significant drop from 83 percent in the year before. The survey also shows that public satisfaction with the board’s handling of complaints has fallen slightly from 97 to 94 percent; in addition, fewer companies are continuing to comply with flaring regulations. 

Nevertheless, the survey does convey some good news: statistics indicate that the ERCB inspected a record number of energy facilities in 2009, which has led to an all-time low in pipeline leaks. Overall, companies are improving or remain consistent in complying with regulations. 

Barter has promised that the ERCB will continue increasing the number of inspections, and that the board is considering changes to regulations in order to encourage companies to capture all natural gas produced.

U.S. Senate Democrats abandon scaled-back energy bill

Despite narrowing the scope of their proposed Energy Bill to home energy efficiency, development of natural gas vehicles, stricter offshore drilling regulations and the removal of the $75 million offshore oil spill liability cap, U.S. Senate Democrats failed to gather the 60 Senate votes necessary to break a Republican filibuster.

Moreover, in recent weeks, several Democrat Senators have expressed concerns about the job implications of subjecting offshore operators to unlimited liability.

Senate Republicans proposed an alternative bill that would raise the cap but keep it short of unlimited liability, and would only apply the raised cap to new leases. Further, it would lift the six month offshore drilling moratorium instituted by President Obama’s administration in May, and would offer coastal States a share of offshore royalties.

Senate Majority Leader Harry Reid (D-Nev.) stated that debate for any new Energy Bill would have to resume in mid-September after Congress’s summer recess.

OEB initiates consultation on implementing Energy Consumer Protection Act, 2010

On August 4 the Ontario Energy Board (OEB) issued a letter to stakeholders that sets out an overview of the consultation process that the Board intends to follow to implement the consumer protection provisions of the Energy Consumer Protection Act, 2010 (the ECPA). The ECPA was passed by the provincial legislature in May, but has not yet been proclaimed into force. A draft regulation under the ECPA was released on July 2. The OEB expects that certain provisions of its regulatory instruments, including the Electricity Retailer Code of Conduct and Code of Conduct for Gas Marketers, will need to be amended to bring them into line with the ECPA and the draft regulation. The Board will hold a stakeholder meeting on August 20 and has asked any stakeholder that wishes to participate to register by August 13.