We are pleased to announce that George Vegh, the head of our energy regulatory practice, was recently invited to discuss Ontario’s new Long Term Energy Plan on the Agenda with Steve Paikin. You can watch a recording of the program by clicking here.
The Government of Ontario today released the province’s most recent Long Term Energy Plan (“LTEP”). A copy of LTEP materials can be accessed by clicking here. As expected, the LTEP did not provide any drastic supply mix or policy changes from current plans. However, there are a number of changes that are worth noting.
Major Supply Changes:
- As expected, there will be no new nuclear facilities;
- A schedule has been set for the refurbishment of the Bruce and Darlington nuclear facilities, starting in 2016;
- The target for non-hydro renewable capacity remains unchanged, but its implementation is extended from 2018 to 2021 – the goal is for procurements of 300 MW of wind, 140 MW of solar and 50 MW of bioenergy for each of 2014 and 2015; and
- Demand reduction targets have increased to 10% of forecasted demand by 2025 (however, when combined with other types of conservation, the total conservation targets are not dramatically changed).
Major Policy Changes:
- Placing greater reliance on regional planning, including municipalities and local communities – which could have a major impact on the development of large wind projects;
- Avoiding commitments to new supply facilities unless and until necessary to do so; and
- Providing annual updates on forecasts and achievement of goals.
EDITOR’S NOTE: please tune in to see George Vegh, the head of our energy regulatory practice, discuss the LTEP on the Agenda with Steve Paikin tomorrow evening at 8:00 pm on TVO. You can watch online by clicking here. For other posts on the LTEP, including a post on George’s recently published paper, “Energy Planning: The Case for a Less Prescriptive Approach”, please click here.
In an increasingly competitive global market for natural gas, the race to export liquefied natural gas (LNG) to Asia is on. With LNG attracting a premium price in Asia, Canada is vying with the US, Australia, Russia, East Africa and the Middle East to rapidly build the infrastructure required to move LNG to key markets in Japan, Korea, Taiwan, China and India. With the commercial success of shale gas plays in the US, the nascent LNG industry in British Columbia is attracting significant interest from investors as an economically feasible venture. BC is particularly well suited to unconventional gas production, where shale is the most commonly occurring type of sedimentary rock in the northeast part of the province. The big shale plays in BC are Montney, Horn River, Liard and the Cordova Embayment. Continue Reading
On November 26, 2013, the BC government confirmed its approval of BC Hydro’s Integrated Resource Plan (IRP). The IRP provides a 20-year outlook of how BC Hydro expects to reliably and cost-effectively meet the anticipated future electricity needs of the province through conservation and acquisition of sufficient generation and transmission resources. Continue Reading
The BC government has announced a 10 Year Plan for BC Hydro in which the province aims to minimize rate increases while allowing BC Hydro to reinvest in its aging assets and infrastructure. As we noted in a prior blog post, Bill Bennett, Minister of Energy and Mines and Minister Responsible for Core Review, previously indicated that BC Hydro rate increases were imminent in view of the ongoing refurbishment of BC Hydro’s heritage generation facilities. Continue Reading
On November 19, 2013, B.C.’s Minister Responsible for Core Review, Bill Bennett, announced that the province’s carbon offset program will be folded into the Ministry of Environment’s Climate Action Secretariat (CAS) while the Pacific Carbon Trust (PCT) is wound down. Minister Bennett indicated that the closure of the PCT will result in savings of approximately $5.6 million annually, part of the core review being undertaken by the provincial government to find $50 million in cost savings to meet the promise of a balanced budget in 2014. The transition of the carbon offset program to CAS will also mean a reduction in staff from 18 to 5. Continue Reading
The BC government recently indicated that it will delay the announcement of the tax regime for the province’s emerging liquefied natural gas (LNG) sector. Minister of Natural Gas Development Rich Coleman had previously indicated that the province was close to finalizing applicable tax rules and expected to provide details by the end of November. The Minister now indicates that more time is needed to complete related consultations with the various LNG proponents.
As noted in our prior blog post, the BC government has promised to establish an LNG “Prosperity Fund” that would accumulate over $100 billion in revenue over a 30-year time frame. Since then, the BC government has been in discussions with LNG proponents in order to better understand their business models and to formulate a tax regime that will be effective and efficient in the circumstances.
The setting of LNG tax rates was expected to be challenging. The BC government needs to balance the desire for generating provincial revenue from the LNG industry, while ensuring that the LNG tax does not make BC-based LNG projects uncompetitive and divert investments to other gas-rich countries. Despite the delay, Minister Coleman has emphasized that details of the LNG tax will be made available well before the LNG proponents are scheduled to make their respective final investment decisions.
Today is the first day of the APPrO 2013 Conference, which will be taking place at the Metro Toronto Convention Center. Sessions will cover a wide range of topics of interest to anyone involved in Ontario’s power sector and there is an impressive roster of speakers. In particular, look out for McCarthy Tétrault’s very own George Vegh, who will be moderating a panel on The Evolution of Policy and Regulation: What’s Ahead for Ontario’s Power Sector? We look forward to seeing you there.
In light of the anticipated release of Ontario’s new long term energy plan (“2013 LTEP”) near the end of November, we wanted to provide a summary of our colleague George Vegh’s paper, “Energy Planning: The Case for a Less Prescriptive Approach” George is the head of McCarthy Tétrault’s energy regulatory practice.
The paper provides an analysis of the discussion paper and data released by the Government of Ontario on the 2013 LTEP. It compares this year’s plan with previous planning exercises, and proposes a less prescriptive approach to electricity planning.
George identifies the opportunity for a dramatic course correction, especially in connection with the role of renewable power, new nuclear facilities and conservation. The data accompanying the 2013 LTEP shows that capacity requirements that are not planned for in terms of specific commitments to these resources have dramatically increased under the newest plan. This suggests that the uncommitted capacity requirements may be met by a greater range of resources, including alternative resources absent from previous planning exercises, such as natural gas and imported power.
George argues that the new LTEP treats the resources as “options that presumably will have to compete among each other to meet the Province’s capacity and energy needs.” He rules out growth in demand as the cause of such developments, and attributes it instead to the open-mindedness of the Government in moving away from a supply mix approach toward a goal-oriented approach.
This open-mindedness reflects a welcome development for the Province, which, in the past, has adopted a much more prescriptive approach to choosing generation technologies.
Stay tuned for further updates on Ontario’s 2013 LTEP.
BC’s Environmental Assessment Office (EAO) and Oil and Gas Commission (OGC) have entered into a memorandum of understanding (MOU) intended to streamline environmental assessments and permitting for liquefied natural gas (LNG) and other reviewable projects by reducing duplication and improving timelines. Continue Reading
A new federal-provincial study has concluded that naturas gas reserves contained in the Montney Formation that straddes British Columbia and Alberta are more than double than previously estimated, equivalent to 145 years of supply at Canada’s current consumption levels.
Prepared jointly by Canada’s National Energy Board, the Alberta Energy Regulator, B.C.’s newly-created Ministry of Natural Gas Development and the B.C. Oil & Gas Commission, the study assesses for the first time the unconventional petroleum resource potential of the Montney Formation. The study’s findings include the following:
- the ultimate potential for unconventional petroleum in the Montney Formation is estimated at 12,719 billion m3 (449 Tcf) of marketable natural gas, 2,308 million m3 (14,521 million barrels) of marketable natural gas liquids (NGLs) and 179 million m3 (1,125 million barrels) of marketable oil;
- B.C.’s share of the Montney Formation’s estimated marketable unconventional natural gas, NGL and oil reserves are 271 Tcf, 12,647 million barrels and 29 million barrels, respectively, compared to Alberta’s share of 178 Tcf, 1,874 million barrels and 1,096 million barrels, respectively;
- volumes of marketable oil, located almost entirely in Alberta, remain highly uncertain as areas richest in Montney unconventional oil tend to be in shallower areas where development is less certain. Alberta’s marketable NGL volumes are similarly uncertain for the same reason; and
- when combined with prior assessments of conventional natural gas resources, the study’s findings indicate that the total ultimate natural gas potential in the Western Canada Sedimentary Basin has more than doubled to 23,249 billion m3 (821 Tcf), with 17,898 billion m3 (632 Tcf) remaining after substracting cumulative production to the end of 2012.
The study confirms the Montney Formation’s status as one of the largest natural gas resources in the world, and prompted B.C.’s Minister of Natural Gas Development Rich Coleman to state that “now, more than ever before, B.C. can supply energy needs at home and abroad. The Montney area will support economic activity in our province for a very long time as a supply hub for liquefied natural gas development.”
On August 28, 2013, we reported that the Quebec Government had published a draft regulation under An Act Respecting the Régie de l’énergie setting out the framework for the procurement of an initial 450-MW block of wind power of the previously announced 800 MW of wind power to be procured. A link to this blog post can be found here. Read more.
This week, the Ontario Power Authority (OPA) announced the beginning of the final stage of its Feed-in-Tariff (FIT) program: FIT 3.0. The OPA is accepting applications until December 13, 2013 for Small FIT Projects with proposed capacity of approximately 10 to 500 kilowatts. Applications are also being accepted during this period for a new Unconstructed Rooftop Solar Pilot.
The OPA provides a summary of the changes introduced by FIT 3.0 here. Of particular note, FIT 3.0 will not include Large FIT Projects, meaning applicants interested in developing projects larger than 500 kilowatts will be required to participate in the competitive large renewables procurement processes, described in detail by our colleagues Suzanne Murphy and Omar Soliman here. Also worth noting is that the Minimum Required Domestic Content Level (MDCL) has decreased from 50% for on-shore wind facilities to 20%. Similarly, the MDCL for solar PV has decreased from 60% to a range of 19-28%, depending on the exact solar PV technology used.
The BC government announced on October 28, 2013, its intention to support clean-energy developments in First Nations communities through investments in the First Nations Clean Energy Business Fund (FNCEBF). In his speech at the 11th annual Clean Energy BC conference in Vancouver, Minister of Aboriginal Relations and Reconciliation John Rustad stated that the FNCEBF will support 10 capacity-building projects and two $500,000 equity ventures all supporting clean-energy objectives.
According to the government, the FNCEBF will provide support to 12 First Nations in connection with a variety of clean-energy projects including:
- a feasibility study by Lake Babine Nation which will look at bringing online a district biomass heating system using wood chips;
- a community energy plan developed by Okanagan Indian Band assessing solar, wind, biomass and hydropower potential in their traditional territory, as well as energy-saving opportunities; and
- a 33-megawatt Narrows Inlet Hydro Project built by the shishálh Nation, in partnership with private investors and another First Nation.
The FNCEBF is designed to promote increased First Nations participation in the clean-energy sector by providing money for capacity-building and equity investment in projects in First Nations communities. The FNCEBF is also used as a revenue-sharing vehicle with First Nations on whose traditional territory clean-energy projects are developed. Currently, the provincial government has entered into three revenue-sharing agreements under the FNCEBF with the Tla-o-qui-aht First Nations, Squamish Nation and the Tahltan Nation under which the government shares Crown land and water rents related to clean-energy projects on First Nations traditional territory.
On October 16, 2013, the Business Council of British Columbia (BCBC) released its white paper on energy policy in BC (White Paper). The White Paper provides an overview of BC’s energy development history and highlights the implications of three key shifts which drive the requirement for further policy reform:
- the shale gas revolution, which has altered continental natural gas pricing and created a new export opportunity to feed Asian demand.
- climate change, which requires coordinated approaches to energy development.
- electricity marketplace change, which requires a new understanding of how future electricity needs will be met when upgrades of existing assets and new supply are needed. Continue Reading
On Tuesday, November 5, 2013, British Columbia and Alberta announced that the provinces have entered a framework agreement on moving energy resources to new markets and confirmed certain principles that will apply to the development of heavy oil pipelines from Alberta’s oil sands to the BC coast. The Premiers have reportedly been at odds with respect to pipeline issues since the British Columbia outlined its five requirements for supporting oil pipeline development. Continue Reading
In Castonguay Blasting, the Supreme Court of Canada has unanimously upheld a broad interpretation of environmental reporting obligations under Ontario’s Environmental Protection Act. The judgment, delivered by Abella J., suggests that corporations may have environmental reporting obligations even in circumstances where they would appear not to have impacted “the environment” as that term is usually understood. Read more.
British Columbia’s Minister of Energy and Mines Bill Bennett addressed the province’s independent power producers at the opening of Clean Energy BC’s annual conference in Vancouver on October 28, 2013. While confirming that there are currently no plans for a power call in the province, Minister Bennett acknowledged that his ministerial mandate specifically contemplates working with the clean energy sector to ensure that there remain significant opportunities for renewable energy companies to provide power to British Columbia, and made a number of observations, including:
- policymaking continues to occur in a fluid and dynamic economic environment;
- electricity rates will need to rise in order to fund critical infrastructure upgrades being undertaken by BC Hydro;
- the load-resource balance embodied in the Integrated Resource Plan (IRP) to be submitted to Cabinet is predicated on three “ground rule” changes:
- the change in 2012 from planning for “critical water” conditions to “average water” conditions in meeting self-sufficiency requirements mandated by the Clean Energy Act, which reduced BC Hydro’s annual forecast demand for new firm energy by approximately 4,500 GWh per year; and
- the related removal of BC Hydro’s requirement to plan for an additional 3,000 GWh of “insurance” energy; and
- the government’s decision to allow liquefied natural gas (LNG) producers to self-generate, though direct drive or “inside-the-fence” gas-fired electricity generation, to meet compression loads associated with gas liquefaction;
- the provision of power for ancillary, non-compression loads of LNG producers remains a “major” opportunity for the renewable energy industry; and
- the IRP points to several potential sources of future opportunity for renewable energy in British Columbia, including forecasted increases in electricity demand, significant population growth, LNG project development and increased mining activity.
Minister Bennett closed by noting that the IRP is expected to be resubmitted to Cabinet in early November. Confirming earlier press reports, Minister Bennett noted that the final IRP will include a “clean energy strategy” that specifically addresses future prospects for renewable energy in the province, with a focus on balancing the need for a diversity of power sources with the need for competitive electricity pricing that minimizes impacts on ratepayers.
On Friday, October 18, 2013, the BC government released its legislative proposal for a new Water Sustainability Act. The proposed legislation is intended to update and replace the existing Water Act and comprehensively modernize provincial water laws. The current Water Act is commonly criticized for failing to regulate groundwater usage and provide adequate protections for water security, stream health and aquatic environments. Continue Reading
The 2014 edition of the IFLR 1000 Guide to the World’s Leading Financial Law Firms has been published, and we are delighted to announce that we are ranked in Tier 1 in the Project Finance category.
In June 2013, we highlighted some important changes by the Ontario Power Authority (“OPA”) to Ontario’s renewable energy procurement program for microFIT, Small FIT, Large FIT as well as Contract Capacity Set-Asides.
Perhaps the most significant of these changes for renewable energy project developers was the removal of Large FIT projects (over 500 kilowatts) from the OPA’s Feed-In Tariff (“FIT”) Program. Pursuant to a Directive from the province’s Ministry of Energy, the OPA was directed to replace Large FIT Projects with a new competitive procurement process to be developed based on feedback from municipalities, Aboriginal communities, industry associations, the general public and other energy stakeholders.
On August 30, 2013, the OPA delivered its initial report and recommendations to the Minister of Energy based on this stakeholder feedback. Though the report does not discuss recommendations for identifying the quantity or types of renewable generation facilities that may be required, it does reveal a few important details of what a possible procurement process for large renewable energy projects in Ontario might look like. In particular, the OPA recommends:
- Continuing the “Request for Proposals” (“RFP”) model with a bidder pre-qualification process and project bid price as key RFP evaluation factors;
- Taking into account proponent experience and financial capability;
- Building on the recent consultation process by requiring community engagement sessions and council deputations during the RFP phase;
- Providing greater municipal control over land use and siting, with the OPA continuing “to reflect government policy priorities and set baseline land use”; and
- Adopting “minimum community acceptance criteria”, which extend beyond environmental or regulatory requirements to instead focus on acceptable standards for a project in a community.
The commencement and the exact content of the renewable procurement process for large renewable energy projects will be issued via a Minister’s Directive at a later date following completion of the province’s Long-Term Energy Plan review (which is slated for release later this month).
Stay tuned for further updates.
An internal BC Hydro Rates Working Group document leaked to the press suggests that residential, small business and industrial electricity users may face a 26.4% increase in their rates from 2014-2016. The document, dated August 23, 2013, attributes the required rate increase to a rise in BC Hydro’s revenue requirement from an estimated $3.8 billion in 2014 to $4.8 billion in 2016. Continue Reading
The 2013 edition of the Clean Energy Canada Finance Guide is out, and we are pleased that we have again topped the Canadian league tables for renewable energy transactions. In particular, we are credited as having advised on:
- the highest number of eligible project finance transactions: a total of 16 deals collectively valued at $2.9 billion
- the highest number of eligible M&A, private equity and venture capital transactions: a total of 7 deals collectively valued at $2.09 billion
Clean Energy Pipeline, published by VB Research and based in London, UK, provides daily news and information about clean energy developments globally. Its coverage includes M&A, private equity, venture capital, debt and equity capital markets, project finance and fund management.
George Vegh, the head of McCarthy Tétrault’s energy regulatory practice, was requested to provide expert testimony on regulatory issues to the Ontario Legislative Assembly’s hearing on the gas plant cancellations. The Committee, whose member described George as “one of Canada’s foremost experts on energy regulation”, sought advice on future planning, siting and procurement issues, which will be part of the Committee’s recommendations to the Legislative Assembly.
The transcript of George’s evidence can be found here.