FAQs about shareholder meetings

Chip Johnston - 

We have compiled a quick reference guide for 35 of the most frequently asked questions about shareholder meetings, including questions concerning who can speak at meetings, whether shareholders can replace the Chair, and whether shareholders can move to remove directors at meetings. We have also included a sample chair’s script for an annual meeting.

Please note, these materials have been prepared for use by corporations incorporated under the Business Corporations Act (Alberta) (the ABCA), whether or not they are listed on a Canadian exchange.

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The Relevance (and Likelihood) of Action on Carbon in a Post-Trump World

Jason Kroft, Jonathan Drance and Luke Sinclair -

The election of Donald Trump and his recent cabinet nominations of individuals who have been described in the mainstream U.S media climate skeptics, including Scott Pruitt (Environmental Protection Agency), Rick Perry (Department of Energy) and Rex Tillerson, the former CEO of ExxonMobil (Department of State), has many questioning the integrity of proposed domestic and international carbon pricing schemes. As a result of the election, the conversation has turned away from the recent momentum of post-Paris climate mandates, to the ramifications if the United Stated decides to abandon its climate commitments. In light of Trump’s inauguration as the 45th president of the United States, it is worthwhile to examine the outlook for carbon regulation and pricing in a post-Trump world. Many market analysts initially expect that the direction of the Trump administration on climate change will have potentially far-reaching implications. We will examine this topic and the sub-themes we identify below in follow-up blog pieces in the weeks ahead.

Federal Action and State Actors

In the United States, the federal government’s ability to influence climate change regulation is largely accomplished through the conduit of the EPA and the Clean Air Act. The new U.S. Federal government will certainly have an impact on the direction of the EPA and the administration and implementation of the Clean Air Act. Many of the obstacles that have prevented environmental regulation in the past (and which critics have cited as reasons for slow action at the federal level in the U.S. on climate change and similar matters) will work against reversing the regulation and regulatory landscape in place in the future. In a recent interview, Ms. McCarthy (the current head of the EPA under the Obama administration), stated that just as she had to provide a scientific foundation for her regulations to curb carbon dioxide emissions, the Trump administration would be required by the Clean Air Act to show that any attempt to tear up the regulations is supported by science. In other words, an onerous standard of proof can act as a double edged sword, one that makes change difficult in either direction.

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Quebec's new Petroleum Resources Act

Erik Richer La Flèche

In the early hours of Saturday, December 10, 2016, a bleary-eyed Quebec National Assembly voted 62 to 38 to adopt Bill 106, An Act to implement the 2030 Energy Policy and to amend various legislative provisions. The Minister of Natural Resources and Wildlife had introduced the bill on June 7, 2016 and the Government had very much wanted it to be passed by the end of the year. Energy policy has been a subject of much debate in Quebec for the better part of a decade and after numerous policy papers, expert panels, public consultations and other tergiversations, the Government was eager to remove a potential irritant from the political scene. The next Quebec election is scheduled for October 2018 and Premier Couillard’s Liberals want the final years of their mandate to have a happier tone than the first three, when the focus was the cleanup of Quebec’s public finances, replete with painful service and budget cuts. With Quebec having largely righted its financial affairs – at the time of writing, unemployment is at a 34-year low and tax revenues have materially increased – it was time to clear the tables.

The legislative process has been arduous. Bill 106 is an unusual statute, akin to an omnibus bill. It deals with four energy-related but nonetheless discrete subjects. The first three are relatively uncontroversial and supported by a wide-ranging consensus. The same cannot be said of the fourth chapter, which contains Quebec’s first-ever law dedicated to the exploration and production of oil and gas: the Petroleum Resources Act (the PRA).

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Supreme Court of Canada dismisses appeal challenging the Alberta Energy Regulator's immunity provisions

Vincent Light and Keith Miller - 

On January 13, 2017, the Supreme Court of Canada released its judgment in Ernst v Alberta Energy Regulator, dismissing the appellant’s claim against the Alberta Energy Regulator (AER) for damages for alleged breaches to her right to freedom of expression under section 2(b) of the Charter. Nevertheless, as we note below, there was no clear majority view on the Court with respect to the issue of whether the AER’s immunity provision is constitutional and the final resolution of that issue may need to wait for another case.

Background

Ms. Ernst brought her claim against the AER for allegedly punishing her because she publicly criticized the AER, and for preventing her from speaking to key offices within the AER organization for a period of 16 months. Ms. Ernst had also alleged that the AER was negligent in the administration of a regulatory regime allowing hydraulic fracturing and drilling close to her property, and for preventing her from speaking to the AER. Her statement of claim alleged that the AER’s restrictions limited her ability to lodge complaints, register concerns and to participate in the AER’s compliance and enforcement process, thereby constituting a breach of her right to freedom of expression under section 2(b) of the Charter.

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BC LNG - Waiting for the World to Change

Jonathan Drance and Glenn Cameron -  

February 2013 was the height of optimism regarding the LNG export facilities that were being proposed for the West Coast of British Columbia. At that time almost 20 projects of varying sizes were at different stages of development. The province released budget papers that included a forecast for its future revenues from LNG. The province’s forecast was based on assumptions about future growth, about which the province could not and did not give assurances. The assumptions included the completion of two large-scale and three smaller-scale LNG facilities by 2020 producing in aggregate 82 million tonnes per annum (MTPA) of LNG. LNG production at that level would have placed BC among the first rank of global LNG producers such as Australia and Qatar.

For 12 to 18 months after 2013, global demand for LNG was and remained high, particularly in Asia. Prices for LNG delivered to Asian markets were over US $16 per million btu (mmbtu) at their peak in 2013. However, by 2016 the global LNG market was affected by new production – principally from Australia and prospectively from the United States. In addition, the price of oil (to which the price of LNG has historically been linked) declined by more than 50%. That resulted in the price for Asian-landed LNG declining from US $16/mmbtu or more to US $6/mmbtu or less.

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Live Long and Prosper: Vulcan Solar Project Receives Quick Approval from Alberta Utilities Commission

Vincent Light -

The Alberta Utilities Commission (“Commission”) approved the EDF EN Canada Inc. (“EDF”) 77.5 megawatt Vulcan Solar Project on October 25, 2016 in Decision 21897-D01-2016. This is only the second utility-scale solar generation project to be approved by the Commission [1]  and is one of about twenty proposed projects that would collectively bring approximately 581 megawatts of new solar power into production, according to the Alberta Electric System Operator’s system access service request list. [2]

One notable aspect of the approval is the short time frame in which EDF obtained its approval – a mere 83 days. The efficiency and timeliness of the Commission’s approval is likely attributable, in part, to the co-location of the Vulcan Solar Project with EDF’s existing 300 megawatt Blackspring Ridge Wind Project, as there were no objections raised to the development of the project adjacent to existing facilities.

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A big step toward public confidence in federally regulated pipelines: Canada's proposed financial requirements unveiled

Vincent Light and Allison Sears - 

With the publication of the Pipeline Financial Requirements Regulations in Part I of the Canada Gazette on September 29, 2016, the federal government provided pipeline companies a first glimpse at the absolute liability (i.e. liability without proof of fault or negligence) regulatory regime first set out in the Pipeline Safety Act, SC 2015, c. 21 (PSA), which amended the National Energy Board Act, RSC 1985, c. N-7 (NEBA).

The PSA, which came into force on June 19, 2016, provided the National Energy Board (NEB) with jurisdiction over pipelines post-abandonment, and provided the NEB with powers to assume control of pipelines in the event of a release. The PSA also established a limit of liability without proof of fault or negligence of $1 billion for pipelines carrying at least 250,000 barrels of oil per day. Determination of absolute liability limits for all other pipelines was, however, left to be prescribed by regulation. 

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Package and Bump transactions not subject to GAAR

Kevin Guenther

When BPC Properties Ltd. (BPC) and Oxford Properties Inc. (Oxford) entered into an agreement relating to the sale of Oxford to BPC in August 2001, Oxford agreed to complete a pre-closing reorganization of its business.  Oxford dropped various properties down into several limited partnerships on a tax deferred basis by utilizing subsection 97(2) of the Income Tax Act (Canada) (the ITA), with those partnership interests subsequently being bumped under paragraph 88(1)(d) of the ITA.

After the completion of the purchase and sale transaction, BPC completed a second bump by transferring certain bumped interests into newly formed property-specific limited partnerships, and subsequently wound-up the upper-tier limited partnerships under subsection 98(3) of the ITA, using the bump rules in paragraph 98(3)(c) of the ITA.

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Cap and Trade in Ontario - Avoiding the EU's Pitfalls

 P. Jason Kroft and Sam Dukesz - 

The European Union Emission Trading System (EU ETS) is the world’s largest cap and trade system, covering all countries in the European Union. It is also one of the world’s most troubled, as it has largely failed to live up the expectations of emissions reductions that it was initially touted to bring about. This blog post analyzes the impediments to the success of EU ETS, and then provides a forward-looking analysis of the applicability of those impediments to the proposed Ontario cap and trade program. 

A Snapshot of the EU ETS: Program Design and Implementation Problems

The EU ETS was initially implemented in phases, with a pilot Phase I from 2005-2007, followed by a Kyoto Phase II from 2008-2012 and a number of subsequent phases. The initial system covered approximately half of EU CO2 emissions across 31 EU countries. The system was limited to certain sectors, as many sectors, such as transportation, were exempted because of concerns about competitiveness with non-participating jurisdictions. 

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Cap in Hand - Are you ready for the Ontario Cap and Trade Regime?

P. Jason Kroft and Luke Sinclair - 

The Ontario government has introduced a carbon cap and trade regime expected to go live in January 2017. The cap and trade program will have real impacts for consumers and business. Click here to see a high level summary of the program with initial estimates of the costs. We are also available for consultation if you want to see how this program may impact your own business. We will continue to monitor the development of the program with practical insights for business.

Quebec releases its Energy Policy 2030

Erik Richer-La Flèche - 

On April 7, 2016, the Government of Quebec released its much-anticipated Energy Policy 2030 before 500 guests at Montreal’s Place des Arts.

Since its election on April 7, 2014, Premier Philippe Couillard’s Liberal government has issued a steady stream of economic and industrial policies that would put dirigiste France to shame. In the last 18 months, it has issued policies, strategies, guides and papers on a broad range of subjects. To name only a few, these include the Maritime Strategy, the Quebec Aluminium Development Strategy 2015-2025, the Strategic Vision for Mining Development in Quebec, the 2013-2020 Action Plan on Climate Change, the Plan Nord toward 2035, 2015-2020 Action Plan, and the Green Paper on Social Acceptability.

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Federal Budget addresses the taxation of Emissions Allowances

Doug Richardson and Julie D’Avignon -

Prior to the federal budget of March 22, 2016 (Budget 2016), the tax treatment of emissions allowances was governed by general principles of income tax law.  Budget 2016 proposes to introduce a specific regime that applies to emissions allowances.

Pursuant to Budget 2016, emissions allowances will be treated as inventory.  However, due to the potential volatility in the value of such allowances, the allowances will not be subject to the “lower of cost or market” method for the valuation of inventory.  Any free allowances received by a regulated emitter will not be included in income.  The emitter will be entitled to a deduction for an accrued emissions obligation to the extent that the obligation exceeds the cost of any emissions allowances acquired by the emitter and used to settle the obligation.  If a deduction is claimed in respect of an emissions obligation that accrues in one year (for example, 2017) and that will be satisfied in a subsequent year (for example, 2018), the amount of the deduction will be brought back into income in the subsequent taxation year (2018) and the taxpayer will be required to evaluate the deductible obligation again each year, until it is ultimately satisfied.  The amount of the deduction will be equal to the cost of the emissions allowances acquired by the taxpayer and which can be used to settle the emissions obligation, plus the fair market value of any emissions allowances needed to full satisfy the obligation

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Key issues in Canadian energy M&A for US buyers

 Chip Johnston, Bradley Squibb and Julie D’Avignon

Although Canada is undergoing its most severe oil and gas downturn since 1998, it remains an important jurisdiction for oil and gas investment and will continue to import substantial amounts of capital and technical expertise from the United States in order to develop its considerable hydrocarbon potential.

The following presentation from Stikeman Elliott and Hilary Foulkes and Paul Perea of Tudor, Pickering, Holt & Co. outlines key topics related to M&A the Canadian oil and gas sector by US buyers, including the following. 

  • Review of the structure of the Canadian energy market
  • Overview of the Canadian public M&A process, including timing and terms
  • Key terms of Canadian confidentiality agreements
  • Important Canadian tax considerations for US investors

Please click here to download the presentation. 

PIPE Investments in Canadian Listed Oil & Gas Companies

A substantial private placement or “private investment in public equity” (a PIPE) involves the direct or indirect acquisition of a control position in a public company by an investor through the purchase of shares of the target and (in most cases) warrants or debentures that are convertible into shares of the target.

A PIPE allows an investor to acquire a substantial equity position at a discount and  an option on the equity to reward future performance while affording the investor the ability to influence and re‑invigorate corporate strategy.

For management a PIPE affords capital to exploit growth opportunities in a down market and creates a lead investor that can support later capital market fund raising. For shareholders, a PIPE is an alternative to M&A (or worse outcomes) and offers the opportunity to realize substantial value later in the cycle as commodity prices recover.

Our PIPE toolkit is a summary of the key commercial, regulatory and tax considerations for investors and targets contemplating a PIPE. We have also reviewed some of the terms of representative PIPE transactions

Restoring an OEB rate ruling, the SCC reaffirms discretion of Canadian tribunals and holds that regulators are not required to allow utilities to pass on costs of collective agreements

 Glenn Zacher, Patrick Duffy and James Wilson - 

On September 25, 2015, the Supreme Court of Canada released a 6-1 decision that has far-reaching implications for provincial energy tribunals and administrative tribunals generally, and which may also impact collective bargaining between regulated entities and their unions.

The case, Ontario (Energy Board) v. Ontario Power Generation Inc., 2015 SCC 44, arose from the decision of the Ontario Energy Board (OEB) not to allow Ontario Power Generation (OPG) to recover through rates $145 million in compensation costs paid to its unionized workers under their collective agreements. The Supreme Court’s ruling focused on two important issues: (i) the scope of the OEB’s discretion to set just and reasonable rates and (ii) the right of tribunals to participate in appeals of their own decisions. 

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One size does not fit all: Changing approaches towards Aboriginal engagement

Patrick Duffy and Patrick Corney -

Attaining an Aboriginal community’s consent to a development project should not be viewed as a line item on a to-do list. Corporations that want to operate successfully in areas subject to Aboriginal interests must therefore find new ways of building or rebuilding relationships – and the first step is developing mutual trust.

The Boreal Leadership Council (BLC) – a working group of conservation organizations, indigenous peoples, resource companies and financial institutions – has developed a framework through which industry and government can engage indigenous communities. The BLC has asked industry and government to implement the idea of Free, Prior and Informed Consent (FPIC) - the right of indigenous peoples to offer or withhold consent to developments that may have an impact on their territories or resources – in other words, a veto power over resource development projects. FPIC cannot exist where a people does not have the option to meaningfully withhold consent.

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Analysis on Quebec mining, oil and gas transparency measures bill published on our mining blog

Many of our readers will be interested in a post by our colleagues on our mining law blog which provides an overview of Quebec’s proposal on the regulation of mining, oil and gas companies with respect to payments in the course of exploration and development activities under Bill 55 An Act respecting transparency measures in the mining, oil and gas industries.  The post also includes an analysis in light of the Federal government’s  Extractive Sector Transparency Act which we’ve previously written about.

Canada Proclaims the Extractive Sector Transparency Measures Act into Force

Keith Chatwin, Ivan Grbesic and Christopher Yung  -

On June 1st  the Government of Canada proclaimed into force the Extractive Sector Transparency Measures Act (the Act). The proclamation comes in advance of the G7 Summit on June 7, 2015, and is a follow-through on the 2013 G8 Summit commitment made by Prime Minister Stephen Harper to establish new reporting standards for Canadian oil, gas and mining companies. The stated purpose is to foster better transparency to ensure that the resource extractive industries support proper development in the countries where they operate, while at the same time making it harder to conceal illicit payments.

As discussed in our post last October, the Act will require affected entities to report any payments made in relation to the commercial development of oil, gas or minerals during a financial year that exceed either the amount prescribed by regulation or, if no amount is prescribed, $100,000 of the following nature and whether monetary or “in kind”:

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NDP Victory

Glenn Cameron, Fred Erickson and Chris Nixon -

On Tuesday night the left leaning New Democratic Party (NDP) was elected to govern the Province of Alberta. The NDP’s victory ended 80 years of conservative governments in Alberta that began with the election of the Social Credit Party in 1935.

Highlights of last night’s historic election include:

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BC LNG pipeline projects: Status update on the environmental assessment process

Cameron Anderson and Jonathan Drance

In a previous post (see August 27, 2014: BC LNG: Environmental Assessment Process for Pipeline Projects), we discussed the Environmental Assessment (EA) process applicable to various pipelines designed to serve the proposed LNG Export Terminals in British Columbia. The following summary provides an update as to the EA status of these projects:

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Key developments in Canadian public markets law for the oil & gas industry - third quarter 2014

Alisha Bhanji, Keith Chatwin, Ben Hudy, Brad Squibb and Chip Johnston -

The last few months have seen a number of regulatory developments in Canadian capital markets that may specifically affect companies in the oil and gas industry. Below, we’ve compiled a list of key legal developments since July 1, 2014 that may be of particular interest, along with corresponding links to our securities blog.

Capital Markets

  • TSXV approves the completion of three oil and gas team-led recapitalizations of shells by written consent of a majority of shareholders (five in total since December 2013).
     
  • TSX circuit-breaker rules are expanded to all actively traded stocks (more than 500 trades a day and average $1.2M in value per day).

Continuous Disclosure

  • Canadian regulators adopt rules for the disclosure of gender diversity and other board composition issues by non-venture issuers. These requirements apply in the 2015 disclosure cycle.
     
  • Canadian regulators announce the outcome of the joint continuous disclosure review of more than two hundred issuers — key issues included revenue recognition in financial statements and non-GAAP measures in MD&A.
     
  • TSX publishes Electronic Communications Disclosure Guidelines and provides guidanceon using social media — confirms the importance of factual statements that avoid selection disclosure. 
     
  • Amendments to the rules governing auditor oversight provide for disclosure of CPAB remedial orders, certain changes to rules involving foreign audit firms and other procedural matters.
     
  • The ASC decision in Haggerty confirms that an “impression, speculation or abstract possibility” does not constitute material information.
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Ontario to Become First Government in Canada to Issue "Green Bonds"

P. Jason Kroft and Tamir Birk -

In just a few weeks, Ontario is expected to become the first government in Canada to issue “green bonds” (also known as climate bonds), a new and burgeoning type of security that raises capital to finance projects that help fight climate change or protect the environment. The offering, expected to be up to $500 million in size, will help fund the Eglinton Crosstown LRT in Toronto and will be initially aimed at institutional investors. According to a Government of Ontario news release, “Green bonds will help Ontario finance transit and other environmentally-friendly infrastructure projects across the province, supporting job creation and strengthening the economy.” As such, Ontario green bonds will be reserved for projects that lower carbon footprints and enhance environmental conditions.

The Government of Ontario is relying on investors to buy the bonds out of a desire to curb climate change and help the environment. According to Ontario Minister of Finance Charles Sousa, there is pent-up demand among investors for green bonds and sustainable investment opportunities, which will enable his government to pay lower interest rates as compared to other types of bonds. Green bonds also provide a diversification opportunity for investors, by providing them with exposure to renewable and green infrastructure projects. Indeed, the world market for environmentally friendly bonds is growing at a rapid pace, with approximately $40-50 billion worth of green bonds expected to be sold in 2014, up from $11 billion in 2013 and $3 billion in 2012. Some analysts predict those numbers could jump north of $100 billion in 2015.

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BC LNG: Environmental Assessment Process for pipeline projects

Cameron Anderson and Jonathan Drance -

In a previous post, we discussed the Environmental Assessment (EA) Process applicable to the proposed BC LNG Export Terminals. Here, we discuss the EA Process applicable to various Pipelines designed to serve the LNG Export Terminals.

Unlike the LNG Export Terminals, where EA jurisdiction has historically been shared between the Federal and Provincial governments, the Pipelines are generally governed only by the BC EA Process, as administered by the BC Environmental Assessment Office (BC EAO). This is largely a result of Federal Regulations (enacted October 24, 2013) which remove from the Federal EA Process any Pipelines which are effectively intra-provincial in nature – as all of the currently proposed LNG Pipelines are.

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The Tsilhqot'in decision: a view from Quebec

Erik Richer La Flèche -

On June 26, 2014 the Supreme Court of Canada recognized for the first time a First Nation’s aboriginal title over an area outside a reserve in Tsilhqot’in Nation vs. British Columbia.

Since then much has been written on whether the decision would have an adverse impact on natural and infrastructure development across Canada, with some columnists and think tanks being alarmed at the consequences the decision may have on projects.

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Grassy Narrows: Supreme Court confirms provincial jurisdiction over logging and mining on Treaty Lands

Patrick G. Duffy and Rachel V. Hutton -

Two weeks after the highly publicized Tsilhqot’in v. British Columbia decision, the Supreme Court of Canada has released another prominent decision in the area of Aboriginal law.  The issue in Grassy Narrows First Nations v. Ontario (also referred to as Keewatin v. Ontario) was a narrow but important one – does a province (rather than the federal government) have the authority to approve logging, mining and other activities on Crown lands that are subject to treaty rights? The Court’s answer can be summarized as “yes, but only if the province has met its duty to consult.” 

What is the significance of the case to industry?

The stakes in the case were high - a ruling against the province would have cast doubt on the validity of provincial approvals for forestry, mining and other activities on Crown lands that were surrendered by treaty. By rejecting that outcome, the Court has provided a pragmatic framework for dealing with surrendered lands, while ensuring that provinces respect treaty rights.  This ruling should allow industry participants to breathe a little easier knowing that existing provincial approvals on surrendered lands are valid, provided the province’s duty to consult has been fulfilled.

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Investment Canada Act approval for oil sands investment by State-Owned Enterprise

Lawson Hunter and Michael Kilby -

In May 2014, the Minister of Industry issued a net benefit approval for PTTEP’s acquisition of control of the Thornbury, Hangingstone and South Leismer oil sands projects from Statoil Canada. PTTEP is a Thai state-owned enterprise for purposes of the Investment Canada Act.

By way of background, in December 2012 the Prime Minister and the Minister of Industry issued new and revised guidance in relation to State-Owned Enterprises. In relation to the oil sands, the relevant policy provides that acquisitions of oil sands businesses by SOEs will only be approved in exceptional circumstances.  The PTTEP acquisition is significant because it represents the first test of this policy.

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Top 10 Questions about Tsilhqot'in

Rachel V. Hutton and Patrick Duffy -

While lawyers, analysts and journalists are depicting the Tsilhqot'in Nation v. British Columbia decision as “monumental”, “landmark”, “groundbreaking” and “historical”, the active participants (developers, Aboriginal groups and government) are asking:  What does it mean?  What does this change?

Despite the earth having apparently moved, one important principle has not changed following this decision.  For parties desiring certainty in acquiring rights over lands claimed by First Nations, best practice remains to obtain consent from the affected groups, typically by way of a negotiated and binding agreement.  However, the bargaining power now vested in groups that have viable claims to Aboriginal Title is undeniable.  Where such a claim exists, the ability of governments to override Aboriginal concerns is significantly constrained.

There are no shortcuts to achieving a full understanding of the impact of this case, and to properly do so, one should (at a minimum) begin with the Calder case, decided by the Supreme Court of Canada in 1973. Indeed, any well-rounded study of the relevant issues involves tackling the cultural, legal, constitutional and above all, historical aspects of the problematic and contentious relationship between Aboriginal peoples and Canada, beginning well over a century ago…

As a starting point, or an alternative to delving into the complexities of Aboriginal law, we have prepared below a set of brief Q&As addressing the questions we are being asked about the case.

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LNG regulatory process imposes lesser burden

Jonathan Drance and Cameron Anderson -

As we’ve previously discussed on this blog, the increased interest in exporting liquefied natural gas offers Canadian producers the opportunity to access international markets and higher international prices. Notably for producers, the requirements for approval by the National Energy Board for LNG projects over the last few years have eased significantly.

The earliest decisions were made under the NEB’s surplus determination procedure, called the Market-Based Procedure, that had been established in 1987, during the early days of oil and gas deregulation in Canada. The first LNG export licence was granted to KM LNG and involved the filing of detailed gas supply information, an oral hearing, multiple submissions and the production of long and complex reasons. BC LNG Export Co-operative obtained the second licence following a written hearing process.

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IESO launches phase 1 of energy storage procurement

Glenn Zacher & Micheal Nilevsky -

On March 12, 2014, the IESO issued an RFP to procure 35 MW of energy storage resources.  This procurement follows on the commitment made by the government in the long-term energy plan and the Minister of Energy’s more recent request to the IESO and the OPA. The Minister requested that the IESO and OPA design a process to procure 50 MW of energy storage by the end of 2014 and conduct an independent study assessing the value of energy storage for Ontario as well as review the regulatory barriers to storage’s participation in the Ontario electricity market. 

The IESO and the OPA collaborated in designing a framework for the procurement of 50 MW of storage, which they submitted to the Minister at the end of January.  The recent RFP relates to Phase I which will be led by the IESO and which will seek to procure up to 35 MW of regulation service and/or reactive support and voltage control from grid energy storage facility operators.  Phase II will be launched later this year and will procure the balance of the 50 MW. This second phase will be led by the OPA and will focus on meeting future capacity needs and may include considerations for remote communities. 

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Obama's Climate Change Policy Presented

P. Jason Kroft and J.B. Elliott -

During President Obama’s State of the Union address on January 28th, he made his intentions clear that he would use his authority to continue to push forward new standards and regulations that would curb the amount carbon pollution US power plants are allowed to dump into the air. Further still, Obama stated that the United States must “act with more urgency” citing continuing climate changes which have seen droughts and floods affect North American cities in recent years.  Canadians must watch these developments for potential implications for business.

In furtherance of these positions, Obama has directed the EPA to issue a draft of a regulation that would set new national standards for carbon pollution by June 1st of this year. It appears the brunt of these changes will target coal-fired power plants, likely forcing hundreds of plant closures throughout the country, and, as such, coal-heavy states have lobbied the EPA extensively with respect to the stringency of the standards to be set in the impending regulation.

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BC LNG - Even No News, is News

Rachel V. Hutton -

While expectations remain high as to the magnitude and profitability of anticipated BC LNG projects, the “who”, “how” and “where” of BC’s nascent liquid natural gas industry are being replaced with one question: “when”? A series of announcements over the past year from the BC government appear to constitute delays in the establishment of the taxation framework for the BC LNG industry.

The current tension lies between industry players who won’t commit until they know the LNG tax regime, and BC government’s challenge of establishing a tax regime that meets political expectations and pleases LNG developers who can shop for plants internationally.

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EPA introduces contentious revised Carbon Pollution Standards for new power plants

P. Jason Kroft and Monique Alicandri -

As we have done previously in this blog, we will highlight from time to time U.S. and foreign developments of potential interest in the regulation of greenhouse gases. While there has been relatively little activity in recent months at the Canadian federal government level in the area of climate change policy, such is not the case south of our border.

On September 20, 2013 the U.S. Environmental Protection Agency announced newly revised pollution standards for new power plants. Currently, there are no American limits at the national level on the amount of carbon pollution new power plants can emit. The proposed rules seek to address this regulatory shortfall and replace a contentious 2012 EPA proposal which received more than 2.5 million comments.

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Federal Government Announces Increased Tanker Safety Measures

On March 18, 2013 the Federal government announced proposed amendments to the Canada Shipping Act, 2001 (the Act) and introduced eight new tanker-safety measures. The announcement was made by Natural Resource Minister Joe Oliver and Transportation Minister Denis Lebel in Vancouver, British Columbia. Recently the province of British Columbia has expressed considerable concern regarding future tanker traffic arising from increased export of petroleum products from the province. The eight measures include increased inspections of foreign tankers, expanded aerial surveillance designed to monitor ship traffic and detect oil spills, a review of tug-escort requirements, expanded research into petroleum products to understand how they behave when spilled in the marine environment, and more ports being designated for traffic-control measures. The first port to be designated to receive traffic-control measures is Kitimat, British Columbia. The ministers also announced the creation of a tanker safety panel to recommend further measures for enhanced environmental safety.

Further, the newly announced Safeguarding Canada’s Seas and Skies Act will amend the Act to include measures to increase regulation regarding ship-source oil spill preparedness and response, introduce new requirements for oil handling facilities, and establish new offences for the contravention of the Act, including administrative monetary penalties.

Alberta Energy Resource Conservation Board Changes Licensee Liability Rating Program

Effective May 1, 2013, the Alberta Energy Resource Conservation Board (the ERCB) is implementing changes to the Licensee Liability Rating Program (the LLR Program). These changes will result in amendments to ERCB Directive 006: Licensee Liability Rating (LLR) Program and Licence Transfer and Directive 011:Licensee Liability Rating (LLR) Program: Updated Industry Parameters and Liability Costs (collectively, the LLR Program Changes). One major effect of the LLR Program Changes is that it will require 248 licensees to post financial security of $297 million in accordance with the LLR Program, up from the current 88 licences that have posted deposits of approximately $13 million to date. According to the ERCB, the changes were made to address concerns raised by industry groups that the LLR program, which was last updated in 2006, significantly underestimated abandonment and reclamation liabilities.

The purpose of the LLR Program is to minimize the risk to the Orphan Well Fund in Alberta posed by unfunded well, facility, and pipeline abandonment and reclamation liability. The LLR program compares a licensee’s assets with its liabilities, and requires companies to post security if liabilities exceed the licensee’s assets. The Orphan Well Fund pays for the abandonment and reclamation of wells, facilities, and pipelines included within the LLR program if a licensee or working interest participant, who has not provided security in accordance with the LLR program, defaults on its obligations to abandon and reclaim or to pay the costs associated with those activities.

Appeal of Port Dover and Nanticoke Wind Project's approval rejected

Patrick Duffy and Kyle Lamothe -

The Environmental Review Tribunal (ERT) recently dismissed a renewable energy approval appeal concerning the Port Dover and Nanticoke Wind Project (Project). In Haldimand Wind Concerns v Director, Ministry of the Environment, the ERT found that the appellants did not show that the project will cause serious and irreversible harm to plant life, animal life or the natural environment. However, the ERT also recommended that the appropriate agencies conduct further research on the impact of wind farms on certain wildlife.

The appeal challenged the Minister of the Environment’s (MOE) approval of the planned 104.4 megawatt wind generation farm in the Counties of Norfolk and Haldimand. The MOE issued the Project’s Renewable Energy Approval (REA) on July 17, 2012.

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ERCB Releases Discussion Paper and Draft Elective Relating to Unconventional Resource Development

The Energy Resource Conservation Board (“ERCB”) is seeking public input on new rules designed to address growing development of unconventional resources in the province of Alberta. Regulating Unconventional Oil and Gas in Alberta – a Discussion Paper outlines a new approach by the ERCB to regulate horizontal drilling and hydraulic fracturing in unconventional oil and gas production in the province. According to the ERCB, the technology used to develop unconventional resources, mainly horizontal drilling and hydraulic fracturing, are not new in Alberta. However, the scale of the development of unconventional resources has increased significantly. To address the associated challenges with large scale developments, the discussion paper suggests a new regulatory approach that includes moving from well-by-well regulation to regulation focused on development within a defined area. This “play-focused” regulation is intended to be performance-based to achieve specific outcomes in water protection, air quality, waste management, surface impacts, resource conservation and orderly development.

According to the ERCB, feedback on the discussion paper will be accepted until March 31, 2013.

In Addition, the ERCB is currently seeking feedback on a draft directive that addresses sub-surface issues related to the increasing use of hydraulic fracturing and horizontal drilling (the “Proposed Directive”). The Proposed Directive will rescind Directive 027: Shallow Fracturing Operations – Restricted Operations and Bulletin 2012-02: Hydraulic Fracturing; Interwellbore Communication Between Energy Wells. The Proposed directive is intended to prevent interwellbore communication, and ensure well integrity during hydraulic fracturing operations.

Specifically, the Proposed Directive includes: (i) requirements to prevent loss of well integrity; (ii) requirements for a licensee to assess, plan for, and mitigate the risks of interwellbore communication with offset wells; (iii) requirement to protect nonsaline aquifers from hydraulic fracturing; (iv) requirements increasing vertical setback distances for hydraulic fracturing operations near water wells; (vi) requirements for pumping volume restrictions and exemptions to setback distances for nitrogen fracturing operations for coalbed methane; and (vii) requirements relating to notification of hydraulic fracturing operations.
 

 

Report Recommends Shake-up of Ontario's Distribution Sector

Patrick Duffy and Andrew Sullivan -

The Ontario Distribution Sector Review Panel (ODSRP) has released its highly anticipated report on the status and future of the Province’s distribution sector. Established in April of this year, the ODSRP’s was asked by the provincial government to make recommendations to improve efficiencies in the sector with the aim of reducing the financial cost of electricity distribution for electricity consumers. The three person panel was composed of David McFadden, Floyd Laughren and Murray Elston, as chair.

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Appeal of South Kent Wind Project's approval rejected

Patrick Duffy and Kyle Lamothe -

The Environmental Review Tribunal (ERT) recently issued its first major decision of a renewable energy approval appeal related to human health concerns since Erickson v Director, Ministry of Environment (see our post on that decision here). In Chatham-Kent Wind Action Inc v Director, Ministry of the Environment, the ERT found that there was no evidence before it that the South Kent Wind Project (Project) will, cause serious harm to human health.

The appeal challenged the Minister of the Environment’s (MOE) approval of the planned 270 megawatt wind generation farm in the Municipality of Chatham-Kent. The MOE issued the Project’s Renewable Energy Approval on June 15, 2012, which prompted Chatham-Kent Wind Action Inc. to launch the appeal. One individual was granted status to participate and another individual to make a presentation.

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Alberta's New Proposed Energy Legislation: Bill 2, Responsible Energy Development Act - Continued Debate

In our blog post of November 5, 2012, we discussed Alberta’s new proposed energy legislation, Bill 2, The Responsible Energy Development Act (the “Bill”). The proposed legislation is designed to streamline the process for approving oil and gas projects by creating a single regulator (the “Alberta Energy Regulator”), but has drawn significant opposition from property rights activists and environmental groups. On November 21, 2012, the Alberta legislature endorsed amendments to the Bill. According to Energy Minister Ken Hughes, the amendments to the Bill strengthen landowners’ rights by ensuring that the Alberta Energy Regulator adequately considers the interests of landowners in project applications in the following manner: (i) require the regulatory agency to give public notice for all project applications it receives; (ii) clarify the appeal mechanism for project approvals; and (iii) provide individuals who believe that they are directly and adversely impacted by an application the ability to file a statement of concern with the Alberta Energy Regulator.

Despite these changes, the Wildrose Party of Alberta, the official opposition, argues that the government has not adequately amended the Bill to protect the interests of landowners and ensure environmental stewardship in Alberta. The Wildrose Party of Alberta proposed amendments include, among others: (i) restoring the right of Albertans to be notified and have a hearing if they would be directly affected by an energy project; (ii) legislating a standard timeline for project applications; (iii) restoring landowners’ ability to appeal to the Environmental Appeal Board when environmental damages are not correctly compensated; and (iv) mandating the Alberta Energy Regulator to uphold property rights and consider the concerns of the “public interest”.

The Alberta Energy Regulator will assume the functions of the Energy Resources Conservation Board and Alberta Environment and Sustainable Development. The Government of Alberta anticipates that the Alberta Energy Regulator will be fully operational by June 2013.

ERCB Accelerating Applications & Updating Oil Sands Regulation

In the wake of increasing applications for commercial developments of oil sands projects, the Alberta Energy Resources Conservation Board (the “ERCB”) has announced that it is taking steps to accelerate project approvals and update its rules regarding how oil sands projects tailings, subsurface reservoirs, water and wellbores are managed.

Speaking at the Canadian Association of Petroleum Producers environmental issues seminar on November 14, 2012, Terry Abel, executive manager of the ERCB’s oil sands and coal division, stated that applications for commercial developments of oil sands projects have tripled in the last three years. This outcome has resulted in long lead times to receiving project approvals and demonstrated that existing guidelines need updating. The current lead times have been attributed to a lack of clarity in what companies need to include in an application. As a result, the ERCB intends to update Directive 23 (Guidelines Respecting an Application for a Commercial Crude Bitumen Recovery and Upgrading Project) to provide a clear and concise directive that is current with today’s requirements to ultimately reduce Supplemental Information Requests from the ERCB.

 

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Minister of Energy issues directive to Ontario Power to continue FIT Program

Andrew Sullivan -

On November 23, 2012, the Minister of Energy (MOE) issued a directive to the Ontario Power Authority (OPA) to continue the Feed-in Tariff (FIT) and MicroFIT programs in furtherance of the directions issued on April 5 and July 11, 2012.

This latest directive follows the Land Use Working Group’s submission of recommendations regarding siting of ground-mounted solar projects on rural zoned lands with multiple primary uses and rural/agricultural zoned lands with abutting residential uses.

The following is a summary of the significant policies the MOE has directed the OPA to implement.

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Alberta's New Proposed Energy Legislation: Bill 2, Responsible Energy Development Act

On November 5, 2012, Bill 2, Responsible Energy Development Act (the “Bill”), received second reading in the Alberta Legislature. The proposed legislation will create a single provincial regulator, the Alberta Energy Regulator, for all oil and gas related activities, which is currently administered by the Energy Resources Conservation Board in concert with Alberta Environment and Sustainable Resource Development. In its current form, the mandate of the Alberta Energy Regulator will be to provide for the efficient, safe, orderly and environmentally responsible development of upstream oil and gas, oil sands and coal development in the province of Alberta. The Alberta Energy Regulator will be responsible to consider and decide applications and other matters in respect of pipelines, processing plants, mines and other oil and gas related facilities and operations in the province from application to reclamation.

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Minister of Energy issues directive to Ontario Power to continue FIT Program

Annie Pyke -

On July 11, 2012, the Minister of Energy issued a directive to the Ontario Power Authority (OPA) providing further direction regarding the FIT 2.0 Rules and Contract. Among other items, this directive provides further details on the prioritization and ranking of applications, land use restrictions and project location, directs the OPA to design a new pilot stream for microFIT applicants with unconstructed buildings and also extends the voluntary withdrawal period for existing FIT Contract holders to September 30, 2012.

A brief summary of the main points of the directive follows.

Priority Points and Ranking

The directive provides that all projects that applied prior to July 4, 2011 automatically receive one priority point and those projects that applied on or after July 5, 2011 will receive half of a priority point. A FIT contract will only be awarded where the project has achieved at least one priority point.

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Health Canada announces wind turbine noise and health study

Patrick Duffy and Ian Noble -

Health Canada announced Tuesday that it will be conducting a study on the health effects of low frequency noise generated by wind turbines on people who live nearby.  

Researchers plan to study a sample of 2,000 dwellings near 8-12 wind turbine installations. The study will examine noise levels at variety of setback distances from less than 500 metres to greater than 5 kilometers. In addition to physical tests such as blood pressure and hormone levels, researchers will conduct face-to face interviews with participants and undertake extensive sound modelling.

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Reforms to Federal Environmental Assessment Process receive Royal Assent

Annie Pyke and Elyse Velagic -

On June 29, 2012, the federal government’s Jobs, Growth and Long-Term Prosperity Act received Royal Assent. This newly enacted legislation implements key components of the Economic Action Plan 2012 and also contains important features of the Ministry of Natural Resources Responsible Resource Development plan. The intended goals of Responsible Resource Development are to: 1) ensure timely and predicable project reviews; 2) eliminate duplication of project reviews; 3) strengthen environment protection, and 4) improve dialogue with Aboriginal peoples.

As discussed in our April 19, 2012 post, as part of the goal to ensure timely and predictable project reviews, there are now fixed timelines for the beginning-to-end review process, which range from 12 to 24 months depending on the type of review. The plan also provides for the replacement of federal assessments with provincial environmental assessments that meet the requirements of the Canadian Environmental Assessment Act, in order to avoid duplication of environmental reviews.

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Export Transmission Tariff report finalized

Glenn Zacher -

In its 2010 Hydro One transmission rate decision, the Ontario Energy Board (Board) increased from $1/MWh to $2/MWh the Export Transmission Service (ETS) rate that was put in place as a “placeholder rate” at market opening and that has remained unchanged since then. The Board, however, directed that “a genuinely comprehensive study be undertaken [by the IESO] to identify a range of proposed rates and the pros and cons associated with each proposed rate in time for [Hydro One’s] next transmission rate application”. Over the past year, the IESO, with input from stakeholders, has been administering an ETS study. Recently, the IESO announced that the study was complete and had been delivered to Hydro One to be filed as part of its upcoming transmission rates case.

The ETS study identifies five export tariff options ― broadly representing the range of views expressed by stakeholders with respect to how export transmission costs should be allocated ― and assesses the options against generally accepted rate-making principles (consistency with neighbouring markets, simplicity, fairness and efficiency). The study also assesses the impact of the various options on Ontario consumers, Ontario producers and the IESO-market, as well as the impact on import/export levels, total bill price, export tariff revenue, production costs, carbon emissions and frequency and duration of surplus baseload generation (SBG). The five options considered in the study are:

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Federal Government announces reforms to the Federal Environmental Assessment Process

Patrick Duffy and Sean Gibson -

The federal government announced on April 17, 2012 its plan for “Responsible Resource Development” which contains a number of proposals to reform key aspects of the review process for federal environmental assessments.

Simplified and Set Timelines for Environmental Assessments

The government’s plan proposes to simplify the current structure of environmental assessments and replace it with two kinds of reviews: 1) a standard environmental assessment, or 2) a review panel. Though details on this proposal are currently lacking, it appears this reform is meant to allow appropriate projects to proceed in a more streamlined fashion through a standard environmental assessment.

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Foreign asset income trusts revive interest in income trust market

Doug Richardson

The public offerings of two foreign asset income trusts (FAITs) have revived interest regarding income trusts in Canada, bringing to light a relatively untapped market. The key factor driving this renewed attention is that FAITs are not subject to traditional Specified Investment Flow-Through (SIFT) rules, as a result of their ownership of assets outside of Canada.

The royalty trust and income trust markets trace their origins to 1986 and 1995, respectively. As interest rates declined during the period and beyond these trusts became popular, since they provided lofty yields well in excess of the prevailing interest rate payable by corporations with similar credit ratings. The reason for the discrepancy was primarily due to the fact that royalty trusts and income trusts were flow-through vehicles that avoided the payment of corporate level tax. The yields payable by these trusts varied, but were typically in the 8 – 10% range.

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Federal Budget 2012: regulatory efficiency for the energy sector

Patrick Duffy and Daniel Suss -

Last Thursday, the federal government released Budget 2012. It contained a number of proposals to improve efficiency and predictability in the review and approval process for major resource development projects while shifting tax incentives and strengthening environmental protection and free trade.

One project, one review

The government plans to create a “one project, one review” policy in coordination with the provinces and territories for environmental assessments (EAs) and associated regulatory processes. Provincial EAs would substitute for federal EAs, and responsibility for review would be consolidated significantly from at present over 40 departments and agencies. Federal and provincial governments would also coordinate Aboriginal consultations and fully integrate them into project reviews.

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ExxonMobil fined €3.3 million for failure to report emissions

Kim Lawton and Annie Pyke

In what is surely a strong reminder to companies around the globe to comply with green regulations, oil giant ExxonMobil has been fined €3.3 million (approximately $4.4 million CAD) for failure to correctly report its carbon dioxide emissions from a Scottish chemical plant. This is the largest fine for an environmental offence in British history.

The fine was imposed by the Scottish Environment Protection Agency (SEPA) under the European Union Greenhouse Gas Emissions Trading Scheme (EU ETS) that came into effect in 2005. Under the EU ETS, companies which fail to report their greenhouse gas emissions can be fined €100 per tonne for unreported emissions.

The fine was imposed in 2010-11, but was only just revealed by SEPA when it published its 2010-2011 enforcement report.

Court rejects application of the prudent investment test to collective bargaining agreements

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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Energy Board Jumps in the tub

Glenn Zacher -

Former Supreme Court of Canada Justice Ian Binnie once remarked on the role of expert witnesses that “the courtroom … is a poor school house and dueling experts may make bad teachers”. 

The Ontario Energy Board (OEB) apparently sympathizes, having become one of the first administrative tribunals in Canada to introduce rules for expert witness “hot-tubbing”. Hot-tubbing (less colloquially, termed “concurrent evidence”) entails competing expert witnesses testifying together and being jointly questioned by the judge/tribunal, counsel and sometimes each other.

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Ontario Energy Board amends licence for new transmitter

Patrick Duffy -

The Ontario Energy Board has ordered that the transmitter licence for TransCanada Transmission (TCT) be amended to change the effective date to the earlier of: (i) the date on which TCT is designated as a developer of transmission assets in Ontario pursuant to a Board designation process: or (ii) the date on which TCT applies for approval to own and/or operate specific transmission facilities in Ontario.

The order is effectively a reversal of the Board’s earlier decision denying TCT an exemption to certain obligations under the Board’s Affiliate Relationships Code for Electricity Distributors and Transmitters (ARC). TCT was particularly concerned with a requirement in the ARC that prohibited it from sharing employees that have access to confidential customer information with other TransCanada affiliates. TCT argued that this requirement drove-up costs and was unnecessary as newly licenced transmitters do not yet have any customers in Ontario. 

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Ontario's new environmental approval system takes effect

Larry Cobb and Jim Harbell -

Beginning October 31, 2011, the Ontario Ministry of the Environment’s (the MOE) new online environmental approval application and self-registration system takes effect. As part of the MOE’s new risk-based approach for processing requests for environmental approvals, the new approvals system will focus on the potential risk that the activity in question poses to the environment and to human health.

An Environmental Compliance Approval (ECA) will replace a Certificate of Approval (C of A). Complex or higher-risk activities will follow the new ECA application process, while standardized or lower-risk activities will follow the Environmental Activity and Sector Registry (the EASR) registration process.

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Environmental groups file Pelly Amendment petition to pressure Canada on oilsands

 U.S. and Canada-based environmental groups have filed a petition with the U.S. Secretary of the Interior under the Pelly Amendment, a statute that allows the U.S. President to impose trade restrictions against countries that engage in trade which diminishes the effectiveness of an international program to protect threatened or endangered species.

The petition claims that Canada has not put in place mechanisms in its oilsands regulatory regime that would prevent or mitigate harm to woodland caribou, whooping cranes and other species of migratory birds. The petition further claims that such omissions have diminished the effectiveness of international efforts to protect those species such as the Migratory Bird Convention of 1916 and the Western Hemisphere Convention of 1942.

Under the Pelly Amendment, the Secretary of Interior must now determine whether Canada’s actions have diminished the effectiveness of these international conservation efforts. If the Pelly Amendment application is certified by the Secretary of Interior, the President may direct the Secretary of the Treasury to prohibit any imports to the extent such prohibition is sanctioned by NAFTA or the World Trade Organization, and shall notify the U.S. Congress of any such actions.

B.C plans to retool Water Act to include licensing of groundwater

In response to the increased water use in recovering shale gas deposits in the Montney Formation and Horn River Basin in northeast B.C., the province plans to amend its Water Act to provide for the licensing of groundwater, among other changes.

The responsibility for licensing water is now divided between the B.C. provincial government and the B.C. Oil and Gas Commission (OGC). Under the Water Act, the OGC may issue short-term water use approvals, while long-term water licenses are dealt with by the provincial government. 

The OGC currently issues between 250 to 300 short-term, water use approvals per year. The application process for a short-term water use approval is about a month. In comparison, there are only about 10 long-term water licenses issued to the oil and gas industry, and the application process takes about a year to complete.

B.C. is the only province in Canada that still does not license groundwater. With the advent of horizontal well hydrofracking operations and its increased draw on water resources, amendments to the Water Act are a welcome response to the needs of a burgeoning sector.

CAPP releases guiding principles for hydrofracking

The Canadian Association of Petroleum Producers (CAPP) recently issued Guiding Principles for Hydraulic Fracturing (hydrofracking) operations that emphasize public disclosure and the protection of water resources. CAPP President, Dave Collyer, stated that the guidelines are intended to address concerns regarding water use. The guidelines set a priority on recycling water for reuse and for public disclosures regarding the quantity of water used in hydrofracking operations. 

In addition, the recommended practice of disclosing fracturing fluid additives is under development and will be released on CAPP’s website when finalized. Fluid additives range from various oil- and water-based alternatives to complex polymeric substances with a multitude of additives.

The guidelines are meant to apply in all jurisdictions and will complement existing and future regulatory requirements.

Federal Government creates expanded oilsands monitoring plan

On July 21, 2011, the federal government announced a new plan to monitor air quality, biodiversity and water quality in the Canadian oilsands region in an effort to provide “hard science’ to reinforce the fact that the oilsands are being developed in a responsible manner. Water quality and quantity will be monitored in the lower Athabasca river. Air quality will be measured at 14 sites for a range of contaminants and those results will be combined with satelitte data. The plan will also examine the effects of contaminants and habitat disturbances on different species.  The plan will integrate many monitoring components already in place, but will boost the number of monitoring sites over a greater geographic area with a specific focus on downstream and downwind impacts. Environment Minister Peter Kent indicated that the government will start to work with the province of Alberta and industry to implement the monitoring plan quickly.

OPA waives pre-NTP termination rights for FIT contracts

On August 2, 2011, the Ministry of Energy directed the OPA to allow Suppliers under Ontario’s Feed-In Tariff (FIT) program to obtain a waiver of the OPA’s termination rights contemplated in section 2.4(a) of the FIT Contract.

Obtaining a waiver of this termination right is meant to expedite issuance of a Notice to Proceed (NTP) by reducing contractual termination risk and allowing Suppliers to procure financing for equipment orders. 

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Highly anticipated ERT decision issued for Erickson v Director, Ministry of Environment

On July 18, 2011, The Environmental Review Tribunal (ERT) issued its highly anticipated decision in Erickson v Director, Ministry of Environment. The ERT found that the applicant in this case did not meet the burden of showing that the project will, more likely than not, cause serious harm to human health. However, the decision is by no means a conclusive endorsement of the safety of wind turbines.

The high-profile appeal alleged that Suncor’s Kent Breeze Wind Project (Project) posed negative human health risks as approved by the Minister of the Environment (MOE) under Ontario Regulation 359/09 (REA). Over 17 days between February 1 and May 26, 2011 the ERT heard testimony of leading experts from around the world on the potential health effects of wind turbines.

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IESO approves new data obligations for renewable facilities

Andrew Sullivan -

Beginning November 1, 2011, many wind and solar PV generators will be required to submit real-time meteorological and output data to the IESO.

The market rule amendment is part of IESO plans for renewable integration. As part of this integration, the IESO is seeking to implement centralized forecasting. Instead of providing energy forecasts, renewable facilities will be required to submit real-time, site specific data (“dynamic data”) to the IESO that will be used to produce variable generation forecasts provided by a third-party.

The requirements will apply to all wind and solar facilities connected to the IESO-controlled grid in addition to embedded non-market participants with an installed capacity over 5MW.

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Germany's Nuclear Plan: A "bump in the road" or "end of the road"?

Andrew Sullivan -

Angela Merkel’s collation government has pledged to decommission all of Germany’s seventeen nuclear reactors by 2022. This historic announcement comes in the wake of a global reaction to the events in Fukushima, Japan. The crippled reactors have caused many governments to rethink their nuclear strategy.

Before the Fukushima disaster, resurgence in the popularity of nuclear energy had been characterized as “the nuclear renaissance”. The industry had finally recovered from the Chernobyl disaster, over quarter-century before. Around the world, nuclear energy appeared to be a viable solution in the effort to reduce greenhouse gas (GHG) emissions. Globally, 2010 saw fourteen new reactors under construction, compared with three in 2005. That number will assuredly fall this year as governments rein-in their enthusiasm for nuclear energy.

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OPA to offer an additional FIT contracts for Bruce or West of London transmission areas

A new directive by the Ministry of Energy to the Ontario Power Authority will give hope to FIT program applicants in the Bruce and West of London areas. The OPA was instructed on June 3, 2011 to issue contracts for large projects within the Bruce to Milton Transmission project as part of the province’s FIT program. As a result of this directive, over 1,000 MW of renewable energy contacts are to be offered - up to 750 MW in the Bruce transmission area and up to 300 MW in the West of London area.

These new FIT contracts are available to projects already on the FIT Priority Ranking list for the Bruce or West of London transmission areas. The OPA has granted a five business day window for proponents to change connection points (though the project location cannot change). The change of connection window begins on June 6 and closes June 10, 2011 at 5:00 pm.

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Energy Board clarifies Transmitter Designation Process

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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Energy Board denies First Nations Intervenor Status

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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Ontario Energy Board grants Distribution System Code exemption for waterpower projects

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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Ontario halts offshore wind projects

The Ontario government announced on Friday that the province will not proceed with any proposed offshore wind projects until further scientific research is completed. The press release circulated mid-Friday afternoon noted that no renewable energy approvals for offshore projects have been issued to date, no new applications for offshore wind projects under the OPA’s FIT program will be accepted and current applications for such projects will be suspended.

To date only one off-shore wind project has been granted a FIT contract, although without the necessary renewable energy approval from the Ministry of Environment, the project will be unable to meet its obligations under such contract. Three additional off-shore wind projects are listed as awaiting connection tests under the FIT program; today’s announcement will see such applications suspended.

This announcement comes as the Ontario government is attempting to balance its commitment to renewable energy in the face of increasing public criticism of wind energy projects related to health and safety and environmental concerns.

Joint Review Panel conditionally approves TOTAL E&P's Joslyn North Mine Project

On January 27, 2011, a three-member Joint Review Panel established by the federal Minister of Environment and the Alberta Energy Resources Conservation Board ("ERCB") released its Report on a review of TOTAL E&P Joslyn Ltd. ("TOTAL")'s Joslyn North Mine Project, a proposed oil sands surface mine that would begin production in 2017.

The Joint Review Panel expressed an intention to approve TOTAL's application subject to twenty conditions that pertain to environmental benchmarks, monitoring and planning, among other requirements.  The conditions include submissions of a detailed tailings management plan two years prior to commencing operations to demonstrate TOTAL's ability to meet all of the requirements of ERCB Directive 074.

Starting 2012 onward, Directive 074 states that mining operators must capture 50 per cent of their annual production of "fines" suspended in tailings.  It is interesting that recent tailings management plans submitted by current oil sands mining operators have been approved despite not meeting the criteria established by Directive 074.

ERCB closes comment period for proposed reforms to Alberta's Well Spacing Framework

 The Alberta Energy Resources Conservation Board (“ERCB”) has closed the comment period regarding proposed reforms to the province’s well spacing framework for conventional and unconventional oil and gas reservoirs.

At present, Part 4 of the Oil and Gas Conservation Regulations (“OGCR“) specifies that the normal drilling spacing unit (“DSU”) for an oil well is one quarter section, and the DSU for a gas well is one section. An operator may apply to the ERCB to order a special DSU which amends the normal DSU’s size, shape or target area on a case-by-case basis.
 
ERCB’s Bulletin 2010-39 outlines the following four proposed reforms to Part 4 of the OGCR:

1. Remove Well Density Controls for Unconventional Gas Reservoirs  

Well density controls will be removed for coal bed methane (“CBM”) and shale gas reservoirs, and for all gas zones to the base of the Colorado Group outlined in Schedule 13A of the OGCR. Existing holdings will require a spacing application to replace the current approved spacing.

2. Increase Baseline Well Densities for Conventional Gas Reservoirs

The baseline DSU for a gas well will be increased from one gas well to two gas wells per section. The increased baseline well density would only apply to lands that are not subject to previous spacing approvals.

3. Standardize Target Areas for Standard DSUs

Target areas for the placement of wells would increase in size so that the target area for the production of gas would be 150 metres from all boundaries of a section and the target area for oil would be 100 metres from the boundaries of a quarter section. Furthermore, references in the OGCR to corner target areas would be eliminated in favour of central target areas across the province.

4. Streamline Regulations regarding Well Spacing Applications

The special DSU application process will be eliminated in favour of operators establishing holdings under Part 5 of the OGCR to allow the operator flexibility to locate wells, increase well density, avoid surface obstructions and access seismic features outside of standard target areas.

Additionally, operators drilling on fractional tracts of land will not be required to apply for a special DSU if the fractional tract of land meets the OGCR’s criteria for a DSU. 
 
In addition to the proposed reforms, the ERCB stated that it would explore increasing the baseline well density for oil pools from one well per pool per standard DSU to two wells per pool per standard DSU.

 

Ontario's long term energy supply plan

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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Japan, US and the EU Face-Off against Ontario's Renewable Energy Program at the WTO

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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NEB approves Mackenzie Valley pipeline

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.
 

Alberta Carbon Capture and Storage Bill enters into force

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.

CSA issues guidance on environmental disclosure requirements

Cora Zeeman

As recently discussed on our securities blog, on October 27, the Canadian Securities Administrators (CSA) issued Staff Notice 51-333 – Environmental Reporting Guidance to provide guidance to reporting issuers on satisfying existing continuous disclosure requirements with respect to environmental concerns. Specifically, Staff Notice 51-333 is intended to assist issuers in determining what information about environmental matters needs to be disclosed by reporting issuers based on the requirements found in National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102), National Instrument 58-101 Disclosure of Corporate Governance Practices (NI 58-101) and National Instrument 52-110 Audit Committees (NI 52-110).

The Ontario Securities Commission’s (OSC) nascent focus on investors’ concerns regarding climate change considerations has been apparent for some time. In February 2008, the OSC released Staff Notice 51-716 – Environmental Reporting, which outlined the results of a targeted review to determine the degree to which reporting issuers were adequately disclosing “environmental matters”. Meanwhile, in December 2009, the OSC published Staff Notice 51-717 – Corporate Governance and Environmental Disclosure, which detailed the OSC’s plans to enhance environmental and corporate disclosure requirements of reporting issuers.

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Prosperity Gold-Copper Mine Project

On November 2, 2010, despite prior approval by the British Columbia government, the Government of Canada denied approval of the Prosperity Gold-Copper Mine (the “Project”) proposed by Taseko Mines Ltd. (“Taseko”). 

Taseko proposed a large open pit gold-copper mine 125-km south west of Williams Lake, British Columbia. In addition to the open pit mine, the Project proposal included an onsite mill and support infrastructure, a tailings storage facility, a 125-km long electrical transmission line, explosives factory and magazine and an access road. The mine site would cover a 35 square km area in the Fish Creek watershed, which drains into several other waterbodies in the surrounding area, including Taseko River, Fish Lake and Little Fish Lake. The development of the Project would result in the necessary destruction of Fish Lake, Little Fish Lake and portions of Fish Creek to allow for the tailings storage plan. 

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Alberta government drafts Bill 24 to regulate CO2 storage

The Alberta government has recently drafted legislation, Bill 24, Carbon Capture and Storage Statutes Amendment Act, 2010, 3rd Sess., 27th Leg., Alberta, 2010 which clarifies ownership of pore space and that would, if passed, make Alberta the first province in Canada to enact comprehensive legislation to regulate large-scale carbon capture and storage (CCS) projects. Under Bill 24, the Alberta government would own subsurface pore spaces where carbon dioxide is stored and would assume long-term liability for injected carbon dioxide once project operators provide data that the gas is contained. Bill 24 would also create a special fund financed by CCS operators that would pay for future monitoring of underground carbon dioxide storage sites and any necessary remediation.

The Alberta Energy Minister, Ron Liepert, emphasizes that Bill 24 would ensure Alberta is on track to reducing greenhouse gas emissions and would also help to double Alberta’s conventional oil recovery which will generate billions of dollars for the province. In particular, the Alberta Carbon Capture and Storage Development Council estimates that carbon captured and used in enhanced oil recovery could produce an additional 1.4 billion barrels of oil from conventional reservoirs generating up to $25 billion in provincial royalties and taxes.

Ontario to update LTEP

On September 20th, 2010, the Ontario government began the process of updating the Long-Term Energy Plan (the “LTEP”). The LTEP was first introduced in 2006 and directs the development of new generation and transmission capacity in the Province. The 2006 plan led to the development of approximately 8,000 megawatts of new generation in Ontario. The new LTEP will incorporate the Province’s commitment to shutdown all coal-powered generating stations by 2014. The general public is invited to comment by answering a series of questions regarding demand, price, generation, transmission and conservation,  on the Ministry of Energy website. The government will also conduct more formal consultations with key stakeholders such as utilities, environmental organizations, businesses, First Nations and Métis organizations, and consumer groups.

The end result of this consultation will be the issuance of a new Supply Mix Directive, which will be posted for comment on the Environmental Registry. Once the Minister of Energy finalizes and issues the Supply Mix Directive it will be used by the Ontario Power Authority to inform the development of the Long-Term Energy Plan which will be submitted to the Minister for approval and then submitted to the Ontario Energy Board for review. The Minister anticipates the LTEP will be finally approved in 2011.
 

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.

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.

OEB denies stay of Green Energy Act assessments

On July 26 the OEB denied a request to stay the Green Energy Act assessments issued under Regulation 66/10.  The request for a stay was made as part of a proceeding before the OEB to determine if the assessments are an unconstitutional indirect tax.  The assessments were the subject of considerable publicity last spring when the C.D. Howe Institute issued a study concluding that the assessments were unconstitutional.  The OEB stated that written reasons for the denial will follow.  A date has not yet been set for a hearing on the merits of the constitutional challenge.

ERCB Bulletin 2010-22 answers some questions regarding regulatory applications for CCS projects in alberta:

The Energy Resources and Conservation Board (“ERCB”) is responsible for the safe, responsible, and efficient development of energy resources in Alberta, including oil, natural gas, oil sands and coal. As part of this jurisdiction, the ERCB regulates approvals for the development and operation of carbon capture and storage (“CCS”) projects. The ERCB has answered some of the questions about how it will treat CCS project applications in Bulletin 2010-22, ERCB Processes Related to Carbon Capture and Storage (CCS) Projects

Bulletin 2010-22 clarifies that the ERCB will use existing instruments to process applications for approval to develop and operate a CCS project, including the following (among others):

The ERCB’s reliance on its existing instruments likely means that its past decisions with respect to acid gas disposal schemes will serve as a useful source for guidance on how the CCS project applications will be treated. For a recent example of such a decision, see Decision 2009‑073 + Errata, AltaGas Ltd. Applications for Two Pipeline Licences, an Amendment to a Facility Licence, and Approval for an Acid Gas Disposal Scheme, Pouce Coupe Field.

Canada to develop CCS standards for underground storage

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.

Alberta announces new royalty curves and initiatives

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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Court of Appeal rules energy regulator can restrict a utility's dividends

Glenn Zacher and Patrick G. Duffy

In a decision released on April 20, 2010, the Ontario Court of Appeal reinstated an Ontario Energy Board (OEB) decision that required Toronto Hydro-Electric System Limited (THESL) to obtain the approval of a majority of its independent directors before declaring a dividend. The decision is notable because it reinforces the unique obligations that distinguish regulated monopolies from private corporations and indicates that regulators have considerable latitude to intervene where a regulated company fails to meet those obligations.

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Supreme Court of Canada overrules narrow scoping of project

Martin Ignasiak and Katie Slipp

The Supreme Court of Canada, in a unanimous decision, significantly limited the discretion of federal "responsible authorities" under the Canadian Environmental Assessment Act (CEAA) to determine the scope of project subject to federal environmental assessment. In MiningWatch Canada v. Canada (Fisheries and Oceans), a proponent was proposing to construct and operate a copper and gold open pit mine in British Columbia. The entire project was subject to the provincial environmental assessment regime. Some components of the proposed project, including a tailings impoundment area, water diversion system and explosives storage and manufacturing area, required federally issued permits or authorizations. The federal Department of Fisheries and Oceans (DFO) determined that the scope of project for the purposes of federal assessment under CEAA was limited to these facilities.

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Alberta introduces land use legislation

Matthew Synnott

The Alberta Land Stewardship Act (ALSA) was proclaimed on September 1, 2009. The ALSA is part of the Land-Use Framework (LUF), the Government of Alberta's initiative to transform Alberta's approach to land-use planning.

The land-use framework

The LUF was finalized in December 2008 after two years of consultation with representatives of the public, municipalities, Aboriginal peoples, industry and environmental groups. Directed at managing growth in a way that balances economic, social and environmental interests in public and private lands, the LUF provides a blueprint for land-use management and decision-making within Alberta. Specifically, the LUF incorporates seven strategies to improve land-use decision-making:

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Canadian implications of U.S. climate change regulation

U.S. House passes American Clean Energy and Security Act

Jason Kroft, Ruth Elnekave and Michael Lees

While Canadian market participants are understandably focused on our own emerging climate-change regulatory framework, it is important to keep up to date on U.S. developments and their potential implications for our markets and industries. This short article provides a high-level overview of key features of current U.S. federal legislative initiatives and their possible effects north of the border.

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Alberta continues to tinker with Royalty Framework

April Kosten

On October 25, 2007, Alberta Premier Ed Stelmach announced the New Royalty Framework (New Framework) to be implemented on January 1, 2009. The government stated that the purpose of the New Framework was to give future generations of Albertans a share in the development of resources, to provide stability and predictability to the oil industry, and to assure investors that Alberta would remain an internationally competitive and stable place to do business. Government analysts projected that royalties would increase by approximately $1.4 billion in 2010, a 20% increase from revenues under the prior regime.

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Canada sets deadline for emissions reporting

Ruth Elnekave

Canadian industrial emitters of greenhouse gases (GHGs) have until June 1, 2010 to report their 2009 GHG emissions. Data collected will be used to create a domestic GHG inventory, harmonizing emissions reporting across Canadian jurisdictions. The reporting deadline, which was established by Environment Canada, applies to facilities that emit over 50,000 tonnes of CO2 equivalent per year, replacing the 100,000 tonne threshold that has been in effect since the introduction of the Greenhouse Gas Emissions Reporting Program in 2004.

The reporting deadline is an element of the federal government's efforts to develop regulations aimed at combating GHGs. Environment Minister Jim Prentice has indicated that regulations will be unveiled prior to December's climate change talks in Copenhagen. As reported in our June 2009 Energy Law Update, the government has published guidelines for a domestic offset program that will form part of Canada's proposed cap-and-trade system, but has yet to develop sector-specific regulations for regulated entities.

Reporting facilities must keep copies of the required information, along with calculations, measurements and other underlying data, in Canada for a three-year period from the required date of submission. Reporting requirements are detailed in the Canada Gazette Notice for 2009 Emissions.

OEB confirms inherent jurisdiction to review unfairness

Patrick G. Duffy

In a recent Union Gas application, the Ontario Energy Board (OEB) confirmed that it retains inherent jurisdiction to review the operation of earnings share mechanisms even if the parties to a settlement agreement have not agreed to an explicit review procedure.

The issue arose in connection with the earning share mechanism that Union agreed to in its 2008 rate case. In the 2008 settlement, Union agreed to split 50/50 with ratepayers any return on equity that was more than 200 basis points over the return on equity calculated under the OEB's cost of capital formula. The 2008 settlement also provided an "off-ramp" in the event that Union's return on equity was more 300 basis points above the OEB's formula; if triggered, the provision required Union to bring application for review of the earnings share mechanism.

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Energy regulators may be held responsible for assessing the sufficiency of Aboriginal consultation

Patrick Duffy and Mel Hogg

In our October 2008 Energy Update, we discussed the decision by the Ontario Energy Board (OEB) to limit its review of the adequacy of Aboriginal consultation in the Bruce to Milton leave-to-construct proceeding and defer certain issues to the environmental assessment process. The OEB noted in that decision that the area was devoid of "definitive guidance from the courts." The significance of this issue has been elevated since last October by the provincial government's new Green Energy Act, which contains many of the promises that are dependent upon the development and approval of new transmission lines.

Two companion decisions released by the British Columbia Court of Appeal in February 2009 -- Carrier Sekani Tribal Council v. British Columbia (Utilities Commission), 2009 BCCA 67 and Kwikwetlem First Nation v. British Columbia (Utilities Commission), 2009 BCCA 68 - provide some guidance in the area of Aboriginal consultation. In Carrier Sekani, the Court determined that British Columbia's utilities regulator has the jurisdiction and obligation to assess the adequacy of an applicant's consultation efforts; in Kwikwetlem, the Court found that this assessment should not be deferred to the environmental assessment process.

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OEB rules that Aboriginal consultation need not be completed before regulatory approval granted

Patrick G. Duffy

Electricity transmitters developing new transmission lines in Canada face considerable uncertainty over the duty to consult with Aboriginal communities. One of the outstanding issues is whether such consultations must be completed before transmitters can obtain regulatory approval for their projects. A recent decision from the Ontario Energy Board (OEB) indicates that the entire consultation process need not be completed before any regulatory approvals are granted, provided that the regulator is satisfied that a workable process is in place to address the concerns of Aboriginal communities.

The issue arose when an Ontario transmitter applied to the OEB for leave to construct for a 500 kV transmission line from Bruce to Milton. A number of intervenors argued that leave could not be granted until the duty to consult had been satisfied. In its September 15, 2008 decision, the OEB rejected these arguments and granted leave, making some significant findings in an area that, as it noted, is devoid of "definitive guidance from the courts".

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Ontario Court rules regulator may consider ability to pay in rate-setting

Patrick G. Duffy

The Ontario Divisional Court recently ruled in Advocacy Centre for Tenants-Ontario v. Ontario Energy Board that the Ontario Energy Board (OEB) has the authority to implement a low-income affordability plan as part of its rate-setting function.

The issue arose in an application to the OEB for approval a utility's gas distribution rates on a cost of service basis. One of the intervenors, the Low Income Energy Network ("LIEN"), requested that OEB include on the issues list whether the utility's residential rates should include a rate affordability assistance program for low-income consumers. A majority of the OEB rejected the issue on the basis that it was outside of the OEB's jurisdiction.
 

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Alberta's new royalty framework

Brad Grant and Kerri Howard

Background

On February 16, 2007, Lyle Oberg, Alberta's Finance Minister, announced the appointment of a six-member panel of experts to complete a review of Alberta's royalty and tax regimes with the goal of ensuring Albertans are receiving a fair share from energy development through royalties, taxes and fees. The Royalty Review Panel (the Panel), which was put in place to fulfill a promise made by Premier Ed Stelmach during the 2006 Progressive Conservative leadership campaign, included independent experts in resource taxation and the royalty system.

The Panel's review focused on all aspects of the oil and gas royalty system, including royalties with respect to oil sands, conventional oil and natural gas. Among the issues the Panel was asked to address were whether the Alberta royalty system is sufficiently sensitive to market conditions and whether the existing revenue minus cost system for oil sands royalties is appropriate given current industry activity.

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IPSP highlights need for regulatory streamlining

Glenn Zacher

On August 29, 2007, the Ontario Power Authority (OPA) filed its integrated power system plan (IPSP) with the Ontario Energy Board (OEB). The IPSP is mandated by Ontario's Electricity Act, which requires the OPA to develop a twenty year plan to assist, through the effective management of electricity supply, transmission, capacity and demand, the achievement of the provincial government's goals, as identified in its June 13, 2006 Supply Mix Directive (the Directive). The Directive, itself based on recommendations by the OPA, requires the OPA to develop a plan that reduces peak demand through conservation, increases Ontario's use of renewable energy, develops nuclear capacity to meet baseload requirements, maintains the ability to use natural gas at peak times and for high efficiency/value applications, provides for the replacement of coal fired generation and strengthens the transmission system to enable and facilitate these supply-mix goals.

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Board denies review of ramp rate amendment

Patrick G. Duffy

In the first case of its kind, the Ontario Energy Board (the Board) has denied an application from the Association of Major Power Consumers of Ontario (AMPCO) to review a market rule amendment by the Independent Electricity Operator (IESO) adjusting the ramp rate multiplier. The decision will be of interest to participants in the Ontario market because it establishes a framework for the scope of the Board's jurisdiction in a rule amendment review, the breadth of documentary production required by the IESO, the allocation of the burden of proof in such applications, and the applicable test under the legislation.

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OEB proposes important reforms to hearing process

Glenn Zacher

On October 2, 2006, the Ontario Energy Board released its Report with Respect to Decision-Making Processes at the OEB, a document that is bound to stir debate. The report was prepared pursuant to the OEB's "efficiency agenda" and aims to reform the Board's adjudicative decision-making processes.

The Board states that the purpose of the reforms is to ensure that the Board's decision-making processes are transparent and open, while at the same time being "more focused on relevant issues, timely and results oriented." The Report proposes reforms in four areas:

  • adjudicative hearings;
  • pre-hearing processes;
  • role of staff; and
  • role of parties.
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Supreme Court Limits Regulator's Jurisdiction over Proceeds of a Discarded Utility Asset Sale

Patrick G. Duffy

The Energy Law Update is prepared by the members of the Energy Group at Stikeman Elliott LLP and reports on issues affecting Canadian and International business.

The recent decision of the Supreme Court of Canada in ATCO Gas & Pipelines Ltd. v. Alberta (Energy & Utilities Board), 2006 SCC 4 could have important implications for the interaction of regulatory powers with the private property rights of a utility and limit the scope of a regulator's condition-making power. At issue was the authority of the Alberta Energy and Utilities Board to review the allocation of proceeds from the disposition of a discarded utility asset when approving the sale.

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