Canadian Energy Law : Lawyers & Attorneys for Environmental Energy Law

TransCanada Corporation (TransCanada) announced on February 27, 2012 that it has sent a letter to the U.S. Department of State (DOS) informing DOS of its intention to reapply for a Presidential Permit in the near future for the Keystone XL Project. TransCanada will supplement this application with an alternative route in Nebraska that avoids the ecologically sensitive Sandhills area once this alternative route is determined.

TransCanada also informed DOS that the southern leg of the Keystone XL Project which runs from Cushing to the U.S. Gulf Coast will proceed independently of the Presidential Permit process because the Gulf Coast Project has its own independent value to the marketplace and no international border is involved.   The approximate cost of the Gulf Coast Project is US$2.3 billion and subject to regulatory approvals, would likely be in service in mid to late 2013.  Jay Carney, a White House spokesman, announced that the administration welcomed the decision on the southern leg, and would help speed up the permit process.

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Javier Gonzalez -

In a highly anticipated vote, a European Union committee of technical experts failed to reach a decision on whether to approve a European Commission proposal to classify oilsands crude oil as more harmful to the environment than other forms of fuel. The proposal will now go to a council of EU ministers, with a final decision expected by June.

The proposal by the European Commission, the EU’s executive arm, would constitute a revision of the EU’s Fuel Quality Directive, which aims to reduce carbon emissions by 6% from 2010 levels by 2020. The proposal would not ban oilsands crude oil, but it would assign it a greater carbon footprint than conventional crude oil. Under the proposal, oilsands crude oil would be deemed to emit 22% more greenhouse gas by weight than average crude oil.

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Glenn Cameron, Susan Hutton and Lisa McDowell -

Despite uncertainty and slow growth in the US and Europe, Canada has continued, for the most part, to post impressive economic results. One reason for this has been the unceasing demand for Canadian natural resources including oil and gas. In addition, Canada’s stable majority government is a significant factor. In recognition of this economic strength, Forbes recently ranked Canada as the best country in the world in which to do business. It is the only country of the 134 surveyed that reached the top 20 in ten separate metrics. Consequently, we expect M&A activity in Canada will increase in 2012, particularly in the energy sector.

The following outlines ten trends that will impact M&A activity in the energy sector in the coming year.

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Glenn Zacher and Patrick Duffy -

In two appeal decisions released this past week, the Ontario Divisional Court rejected the application of the “prudent investment test” to forecast costs under collective bargaining agreements negotiated between a utility and its unionized employees.  

The prudent investment test is a regulatory principle that was first articulated by Justice Brandeis of the United States Supreme Court in the 1923 decision of Southwestern Bell Telephone Co. v. Public Service Commission.  The purpose of the prudent investment test is to protect utility shareholders in respect of past investments in large capital projects that later prove to be unnecessary. Because of the long lead times for constructing infrastructure projects, courts and regulators have ruled that it would be unfair to utility shareholders to assess the prudence of the investment with the benefit of hindsight. Instead, managerial prudence is initially assumed and any subsequent challenges are assessed on the information available to a utility’s management at the time the investment was made.

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A review panel appointed by the Alberta Conservative government has concluded that it is reasonable for the Alberta government to approve two new high-voltage power lines between Edmonton and Calgary that will cost approximately $3 billion to construct. AltaLink has been selected to build the western line and ATCO Group has been selected to construct the eastern line. The panel also recommended that the Electric Statutes Amendment Act, 2009 be amended to make certain future decisions regarding transmission expansion be sent to the Alberta Utilities Commission for approval, as was the practice until 2009.

Critics of this project argue that this much new infrastructure is not needed at the moment and critics are also concerned about the economic impact this will have on industry and residential customers. Proponents of the project argue that the two lines are needed for reliability and in the case of an emergency. The risk of having the lines completed too late is far greater than having them constructed before they are required. The Alberta Electric System Operator believes the project makes the power grid more efficient and it accommodates long-term growth.

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Myriam Fortin -

The final measures provided under Bill 89, An Act to amend the Environment Quality Act in order to reinforce compliance came into force this February 1^st, giving the Ministry of Sustainable Development, Environment and Parks (Ministry) greater powers against contraveners.

Fines may now reach one million dollars for natural persons and six million dollars for legal persons for a violation of the Environment Quality Act (EQA).

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Patrick Duffy and Daniel Suss -

The much hyped Don Drummond Report released Wednesday is an appeal for a more sustainable and rational approach to fiscal policy in Ontario.

Energy features prominently in Drummond’s report. Beyond a general emphasis on maximizing efficiencies across the board, there are specific recommendations regarding the FIT review, energy procurement, and the future of Ontario Power Generation (OPG), Hydro One, and local distribution companies (LDCs). The focus is on sending more efficient price signals to the marketplace to encourage more optimal levels of investment in electricity infrastructure and capitalize on export opportunities for domestic goods and services.
 

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The 3^rd Annual Canadian Power Finance Conference held in Toronto last week brought together a number of executives from some of the leading developers, investors and lenders in the Canadian energy market. Most of the sessions focussed on renewable energy, particularly wind, solar and hydro.

The tone was relatively optimistic for growth for a number of reasons including attractive medium-term renewables targets in provinces like Nova Scotia and Ontario and the need for large amounts of new energy infrastructure across Canada. Members of the developer panel were confident Canadian power purchase agreements will be attractive to lenders and other financing parties in late 2012 and beyond as procurement programs elsewhere in the world slow down. Most panelists anticipate significant consolidation and a lot of M&A activity this year. Still, there were concerns raised about the lower demand for energy and increasing government scrutiny over ratepayers’ costs.

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The Canadian Association of Petroleum Producers (“CAPP”) unveiled six “operating principles” it expects natural gas companies to follow. These new environmental reporting guidelines for natural gas companies are an attempt to alleviate concerns regarding hydraulic fracking. There are concerns that fracking may result in natural gas and other toxins leaking into water sources.   

CAPP specifically wants its members to reveal the following information:  the chemicals they use when extracting natural gas by fracking; how they construct wellbores; test results of water wells near drilling sites; how they transport, handle and store fracking fluids; and their processes for creating well-specific risk management plans for fracturing fluid.

However, these new guidelines are voluntary and do not establish any firm rules about hydraulic fracturing. Thus, it is not clear whether any companies will abide by CAPP’s new guidelines.

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