Canadian Energy Law : Lawyers & Attorneys for Environmental Energy Law

The Ontario government has published amendments to the Renewable Energy Approvals Regulation (O. Reg. 359/09) that will take effect on January 1, 2011.  We reported on an earlier version of the proposed amendment in an October blog posting.

The most significant changes in the amended regulation concern noise receptors and setback requirements for wind faculties. As a result of the amendments, the term “overnight accommodation” in the definition of noise receptors will be replaced with a definition of “dwelling” based on the definition in the Building Code. The definition of “dwelling” was also modified by replacing the words “intended to be used” with “capable of being used”.These changes appear to set a higher threshold for what structures qualify as a dwelling.

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Lanette Wilkinson

In 2006, the Minister of Energy directed the Ontario Power Authority (the OPA) to develop an Integrated Power System Plan (the IPSP) that focused on creating a sustainable energy supply in the Province over the next twenty years. In 2007, an IPSP was introduced to the Ontario Energy Board (the OEB), but the hearings were subsequently suspended. On November 23, 2010, the Province released a long-term energy supply plan (the Plan) that is intended to address developments in technology, the uptake of renewable energy arising out of the Province’s feed-in tariff program (the FIT Program), and shifts in demographics and the economy since the release of the IPSP in 2007. A proposed supply mix directive based on the Plan has been posted on the Environmental Registry for a forty-five day comment period ending January 7, 2011, after which time the directive will be finalized and issued to the OPA. The OPA is to develop an IPSP to be submitted to the OEB for review. Once finalized, the IPSP will constitute the new system plan for the next 20 years and will be updated every three years as required by regulation. The Plan contemplates the following:

Eliminating Coal by 2014

The Province remains committed to eliminating coal generation by shutting down two units in Nanticoke in 2011 and converting Thunder Bay Generating Station and Atikokan Generating Station to respectively use natural gas and biomass by 2013. The Province is also considering accelerating the closure of the remaining six units of coal-fired generation (at Nantioke and Lambton) and converting these units to natural gas.

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Ashley M. Weber

The debate over Ontario’s feed-in-tariff Program (the FIT Program)was elevated to a new level in September, when Japan launched a dispute settlement proceeding against Canada at the World Trade Organization (WTO). On September 16, 2010, Japan filed a request for consultation with the WTO Dispute Settlement Body (DSB) regarding Canada’s measures relating to the domestic content requirements in the Ontario FIT Program. Less than two weeks later, the US and the EU followed suit and requested to be joined in the consultations. In its submission to the WTO, the EU argued that “[the] renewable energy generation sector is of key interest for the EU importers, exporters and investors" The US stated that, as a major innovator of renewable energy and related technologies, and as a primary source of Canadian imports of products used in the production of renewable energy, it has “substantial trade interests in these consultations.”While these requests for consultation represent the first of many steps in the WTO settlement dispute process, it nonetheless signals a desire by the challenging parties to push back on Canada’s domestic content requirements that they feel are having a negative impact on the export of their renewable energy products into Canada. 

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On December 16, 2010, the National Energy Board (NEB) approved the application for the construction and operation of the Mackenzie Gas Project. The Project includes the 1,196 kilometer Mackenzie Valley Pipeline, three onshore natural gas fields and a 457 kilometer pipeline to carry natural gas liquids from near the coast of the Beaufort Sea to northwestern Alberta and onwards to southern markets. The NEB attached 264 conditions to the Project’s approval in areas such as engineering, safety and environmental protection. The NEB will monitor the Project throughout its lifespan to ensure these conditions are being met.

The NEB began hearing evidence in January 2006 on five applications filed by a number of parties, including lead partner Imperial Oil. The Board held over 58 days of hearing sessions in 15 communities throughout the Northwest Territories and northern Alberta.

To move forward, the NEB’s decision must now be approved by the Federal Cabinet. If the Project is approved, construction is expected to begin in 2014 and the pipeline is scheduled to be in operation by the end of 2018. If the Project proceeds, it will be the largest pipeline system to be constructed and operated in Canada’s north.

A news release was provided by the NEB concurrently with the reasons for their decision.
 

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The proclamation of the Oil and Gas Activities Act, S.B.C. 2008, c. 36, (OGAA), on October 4, 2010, represents a significant change to the legal regime for oil and gas activities in British Columbia. The OGAA sets out the regulatory framework that will now govern oil and gas activity within the Province. It attempts to simplify the previous oil and gas framework by consolidating and modernizing the requirements that previously existed under several acts and regulations. This was accomplished by repealing the Oil and Gas Commission Act, the Pipeline Act as well as the regulatory provisions in the Petroleum and Natural Gas Act.

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The 16th meeting of the Conference of Parties of the United Nations Framework Convention on Climate Change and the 6th Conference of Parties to the Kyoto Protocol (jointly “COP16”), in Cancun, Mexico, concluded on December 11th.

The negotiations in Cancun came almost a year after the summit in Copenhagen where high level negotiations fell short of producing a binding post-2012 pact on reducing greenhouse gas emissions and providing aid to developing countries.

With no expectation of a binding global treaty resulting from the conference, the Cancun summit concluded with the release of the Cancun Agreement, a United Nations backed deal that commits countries to increase their effort to battle climate change and preserve key principles of the Kyoto protocol. The Cancun Agreement, which endorses the view that climate change is “one of the greatest challenges of our time” which requires long-term and cooperative action in order to prevent devastating global impacts, commits all countries to boosting their efforts to reduce greenhouse gas emissions, and to allow for such plans to be scrutinized by the international community.

The Agreement also fleshes out the promise of developed countries in Copenhagen to provide $100 billion (U.S.) by 2020 to aid in greenhouse gas emissions reductions in the developing world. Under the Agreement, developed countries have agreed to set up a “Green Climate Fund” to manage the promised aid; set up technology-transfer programs to help developing countries adopt renewable energy technologies, and fund projects to reduce deforestation and encourage tree planting. The fund is to initially be managed by the World Bank.

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Following our report in November, on December 2, 2010, Bill 26 received Royal Assent and came into force as the Mines and Minerals (Coalbed Methane) Amendment Act, 2010, S.A. 2010 c.20. The Act declares coalbed methane “to be and at all times to have been natural gas” for both Crown and freehold minerals. Despite this declaration, the Act expressly honours existing agreements that specifically grant coalbed methane to the coal owner and protects coal owners or their lessees, surface owners and the provincial government from being sued for damages or compensation from the extraction, production or removal of coalbed methane prior to the Act coming into force.

The Act amends the Mines and Minerals Act, R.S.A. 2000, c. M-17, which previously only declared coalbed methane to be natural gas on Crown land, by clarifying the nature of ownership of coalbed methane on freehold lands. The enactment is intended to provide clarity regarding coalbed methane ownership, the lack of which the Alberta government saw as a potential barrier to development of the resource in the province.

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Following our report in November, as of December 2, 2010, Alberta's Bill 24, the Carbon Capture and Storage Statutes Amendment Act, 2010 has entered into force. Bill 24 requires the Alberta government to accept long-term liability for carbon dioxide (CO2) that is sequestered underground by way of carbon capture and storage (CCS) projects. The bill proposes that the government assume liability from project operators by becoming the owner of the captured CO2 once it is provided with data proving the stored CO2 is contained. The bill also clarifies the definition of pore space and creates a post-closure stewardship fund for the costs of ongoing monitoring and remedial work. Alberta is the first province in Canada to pass comprehensive legislation for CCS.

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John Lorito

The following is a brief summary of the main Canadian federal income tax considerations applicable to windpower and solar power projects in Canada and, in particular, the accelerated capital cost allowance rates for qualifying depreciable property and the Canadian renewable conservation expense regime. 

Accelerated Capital Cost Allowance Rate

“Capital cost allowance” (CCA) is essentially depreciation for Canadian federal income tax purposes. CCA deductions are discretionary and are taken on a declining balance, class-by-class basis. For example, if the capital cost of depreciable property of a particular class is $100 and the CCA rate for the class is 30%, CCA to a maximum of $30 may be claimed in respect of the property in the first year (subject to the half-year rule discussed below). If $20 of CCA is claimed, this amount is deducted from the capital cost to arrive at the “undepreciated capital cost” (UCC) and the 30% rate is applied to this amount to determine the maximum deduction in the following year (in this example, $24). The cost of newly acquired property of the same class is added to the UCC and proceeds from the sale of property in the class (up to the original cost of the property) is deducted from the UCC. If the UCC is negative at the end of a year, the negative amount (known as recapture) is included in computing income in that year.

CCA classes 43.1 and 43.2 of the regulations (the Regulations) under the Income Tax Act (the Act) provide enhanced CCA rates for various renewable asset properties. Certain assets of a qualifying wind energy conversion system or photovoltaic system that are included in class 43.1 will be entitled to an accelerated CCA rate of 30% per year. Such assets that are acquired after February 22, 2005 and before 2020 and that would otherwise be included in Class 43.1 are included in class 43.2, which has a CCA rate of 50%. 

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