Canadian Energy Law : Lawyers & Attorneys for Environmental Energy Law

Patrick Duffy -

In issuing an electricity transmitter licence to Chatham-Kent Transmission Inc. (CKT), the Ontario Energy Board made some important comments that will be of interest to any transmitters seeking to participate in the Board's upcoming transmitter designation process for the East-West Tie.

While the primary purpose of CKT's application was to own and operate a transmission line that will connect a wind generation facility within the Municipality of Chatham-Kent to the grid, CKT also indicated its longer term intention to participate in the Board's transmitter designation process.  A number of intervenors questioned whether CKT had the financial and technical capability to qualify for a full transmitter licence and requested that the licence be limited to the specific facility proposed by CKT.

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Patrick Duffy -

In case with strong echoes of Rio Tinto Alcan Inc. v. Carrier Sekani Tribal Council, the Ontario Energy Board has recently denied a request from a group of twelve First Nations for intervenor status in a licensing application.

The application seeks licence amendments related to eight hydroelectric generating stations owned by AbitibiBowater. The amendments will facilitate the sale of the generating stations to Bluearth Renewables, which intends to take advantage of incentives for upgrades and expansions offered by the Ontario Power Authority's Hydroelectric Contract Initiative (HCI). The First Nations group requested intervenor status with the intention of exploring the adequacy of the Crown’s consultation efforts with respect to potential infringements of their Aboriginal rights. The group argued that the sale of these facilities to Bluearth would result in increased or expanded hydroelectric generation under the HCI, which would change water levels and flows and impact their ability to harvest wild rice.

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Newly re-appointed federal Minister of Environment Peter Kent signalled that the Canadian government will begin regulating greenhouse gas emissions from coal-fired electricity and oilsands projects. Minister Kent stated that regulations for coal-fired plants will arrive first, with rules for oilsands to follow later this year. For now, a carbon tax or cap-and-trade plan will not form part of the regulations. Instead, the federal government will issue “flexible guidelines” that allow individual sectors to meet their targets through measures such as technological improvements.

Minister Kent indicated that there will be an accommodation period for oilsands operations, and that regulations will not be a “hardline of sudden conversion.” As well, Minister Kent noted that the rules may not necessarily adopt all the provisions of last year’s proposed coal regulations, which starting in 2015, would have forced the shut-down of coal plants over 45 years old if upgrades could not bring down plant emissions.

Minister Kent indicated that federal regulations are needed to meet Canada’s commitment to reduce greenhouse gas emissions by 17 percent below 2005 levels by 2020, the same target provided in the United States by the Obama administration.

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Further to our update on January 28, 2011, Alberta Energy Minister Ron Liepert continues to develop plans for a single energy regulator in the Province. A discussion paper recently tabled in the Alberta Legislature outlines the Energy Department’s proposal to create an “energy superboard” that would oversee the development of all oil, natural gas, oil sands and coal within Alberta, and take on all of the regulatory functions for air, water, land, mine and facility authorizations. These responsibilities are currently distributed amongst several government entities, including the Energy Resources Conservation Board (ERCB), Sustainable Resource Development and Alberta Environment.

Coal is currently regulated by the ERCB, however, the paper indicates that because coal extraction methods are similar to those used for oil, gas and oil sands, it fits efficiently within the scope of the single regulator. The paper also states that mineral regulation would be governed by the single regulator sometime “down the road”.

The paper is a starting point for new energy regulation the Minister expects to table during the legislature’s next sitting. Interested parties can provide feedback through the Energy Department’s website and the Minister has indicated that officials would be willing to sit down with organizations interested in contributing to the formation of the new law.

A complete copy of the paper, entitled “Enhancing Assurance” is available here.

 

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On Wednesday May 11, 2011, Charlie Parker, Minister of Energy for Nova Scotia announced the results of the Play Fairway Analysis, a study into the offshore resources of Nova Scotia. The government invested in the study in order to develop an industry standard picture of Nova Scotia’s offshore geology.

According to the study, there are more than 3.3 trillion cubic meters of natural gas and 8 billion barrels of oil sitting offshore Nova Scotia. According to the minister, over the next several months the department will be marketing the study to oil and gas companies in the hope of gaining interest in a call for bids that will occur in the near future.
 

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On Wednesday May 11, 2011, the United States House of Representatives advanced two bills that would accelerate offshore oil and gas drilling. The first of two bills would give the Federal Bureau of Ocean Energy Management, Regulation and Enforcement a maximum of sixty days to approve or reject applications for offshore drilling permits. If the board fails to make a decision within the time frame, the legislation automatically deems the permit application to be approved.
 
The second bill relates to forcing the federal government to sell drilling leases in waters off the coast of California and much of the Atlantic coast. Neither measure is expected to advance in the Senate as the Obama administration, as well as congressional democrats have voiced there opposition to the passing of such legislation.

The bills attempt to address the continued debate surrounding the cause of and solution to high gasoline prices in the United States. Supporters of the house bill argue the legislation would have the effect of eventually lowering oil prices by ensuring more crude oil supplies are tapped domestically.
 

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The Alberta Energy Resources Conservation Board (“ERCB”) issued Decision 2011-012, which concluded that the production of natural gas from 455 intervals in 321 wells located in northeast Alberta may present a significant risk to the ultimate recovery of Wabiskaw bitumen due to a potential decline in reservoir pressure.

The ERCB ordered an interim shut-in of gas production of these wells, plus an additional 152 intervals, effective May 31, 2011. Production from these intervals must remain shut-in pending the ERCB’s final hearing and decisions.

In discussing the test for an interim shut-in of gas production, the ERCB stated that the Board only considers whether the bitumen is potentially recoverable, and not whether it is commercially recoverable. An interim shut-in order will be issued if bitumen is potentially recoverable and gas production has the potential for significant wasting of bitumen during the time required to decide on an application for permanent shut-in.
 

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P. Jason Kroft and Cora Zeeman -

Recent developments in international carbon finance have seen investors and carbon intermediaries moving away from the global carbon market and towards local initiatives, such asregional carbon trading regimes, as a means of participating in carbon reduction financing or achieving climate change objectives. This short piece identifies and begins to examine this trend away from global carbon market development and towards regional initiatives and some of the reasons for this movement.

At the 1997 climate change conference in Kyoto, Japan, 193 nations, including the European Union (EU), arrived at a global consensus on using financial measures to combat climate change. The Kyoto plan introduced restrictions on greenhouse gas (GHG) emissions by industrialized countries and the creation of credits to emit GHGs that would be tradeable in a global carbon market. Developing countries, including China and India, were not given GHG emissions limits and could sell credits based on their own GHG emission reductions to industrialized nations. When the Kyoto commitments entered into force in 2005 and, as a result, became a binding international commitment, they were taken up in earnest by the EU and were made mandatory under the EU Emissions Trading Scheme (ETS). An emissions trading system has the advantage of allowing companies to choose the most cost-effective means to achieve GHG emission reduction targets by either purchasing allowances or decreasing emissions.

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As part of an effort to reduce the U.S. federal deficit, the Democratic Party-controlled Senate is calling for the repeal of $2 billion in tax breaks for the five largest oil companies. The proposed Senate bill would modify foreign tax credit rules, limit deductions of income attributable to oil and gas production and eliminate domestic manufacturing tax deductions.

U.S. Senate Finance Committee hearings were held on May 14 to discuss the issue with industry leaders, who stated that the bill would limit investments in exploration and production.
 

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The government of Saskatchewan has approved SaskPower’s construction of the $1.24 billion Boundary Dam Integrated Carbon Capture Storage Demonstration Project. The project will involve the refurbishment of a coal power generating unit at the six unit Boundary Dam Power Station near Estevan in southeastern Saskatchewan.

Carbon dioxide emitted from the 110 megawatt unit will be captured and sold to oil and gas producers seeking to use the product for enhanced oil recovery in mature reservoirs. As well, sulphur dioxide will be scrubbed from the flue gas to produce sulphuric acid.

SNC Lavalin and Cansolv, a Shell Global Solutions subsidiary, have been contracted to build the project with an expected completion date in 2014. When fully operational, the unit will yield approximately one million tonnes of carbon dioxide per year.

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Following the Deepwater Horizon Macondo incident, the British Petroleum blowout in the Gulf of Mexico, the government of Newfoundland and Labrador commissioned an independent study into the preparedness and ability of provincial agencies to respond to an off-shore crisis. Captain Mark Turner, an expert in marine safety and environmental management, was retained to assess the current regulatory framework and the ability of the province to respond to an incident.

Among the recommendations of the study, the report suggests the need to increase the liability cap on compensation in the event of a spill or blowout from the current Canadian law limits on liability for damages from a spill of $40 million for Arctic water and $30 million for spills on the eastern coast. The report also advocates for the inclusion of regular audits performed by independent third parties in order to add transparency to internal findings of the regulators. Furthermore, the report recommended the need for the Canada-Newfoundland and Labrador Offshore Petroleum Board to design more detailed strategies aimed specifically at blow-outs, and advocated for a “Total System” approach to blowout control, management response and recovery.

Newfoundland & Labrador Natural Resource Minister Shawn Skinner said the government supports all of the recommendations and is prepared to work with the other provincial and federal agencies that share responsibility for the oversight of off-shore drilling and production activities.
 

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A lawsuit  filed last Wednesday against the U.S. federal government by a group called Our Children’s Trust alleges that key government agencies have failed to confront a human-induced global climate crisis and, by their actions, have caused, approved and allowed too many carbon emissions into the Earth’s atmosphere. No similar litigation has been attempted in Canada, though Canadian courts have previously declined to enforce compliance with Kyoto Protocol obligations.

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Patrick Duffy

In an oral decision made on May 5, 2011 the Ontario Energy Board granted an application by Ontario Waterpower Association (OWA) for an exemption from sections 6.2.4.1(e) and 6.2.18 of the Distribution System Code (DSC) for hydroelectric projects with a nameplate capacity of between 1 and 10 MW that are located on provincial Crown or federally-regulated lands.

Section 6.2.4.1(e) of the DSC requires a distributor (in this case Hydro One) to remove an applicant's connection capacity allocation if the applicant has not signed a connection cost agreement (CCA) within 6 months of receiving the allocation.  The provision was introduced in the fall of 2009 to ensure that connection capacity was not tied up by projects that were not being pursued diligently. The Board found there was no evidence that the 28 hydroelectric projects at issue in the application were "laggards" and noted that such projects face unique challenges because of their site-specific nature and the extensive approval processes involved. Accordingly, the Board granted these waterpower projects an indefinite exemption to this requirement. 

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