Canadian Energy Law

3rd Annual Canadian Power Finance conference: outlook for 2012 and beyond

Stikeman Elliott LLP — Fri, 03 Feb 2012 11:28:26 -0500

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

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

Speaking in regard to independent power producers, panelists said they expect lots of requests for proposals (RFPs) to continue out of British Columbia for the foreseeable future. Alberta is also looking relatively attractive as it is expected to grow at 3% annually and to shut down a number of coal plants over the next decade or two. There should be opportunities for RFPs in Ontario, if somewhat lesser than had been expected given what may be a situation of oversupply in the short term. With a certain amount of attrition expected from Ontario’s feed-in tariff contract holders, the phase-out of coal, and the possible drop in nuclear energy production, panelists expect the need for supply in Ontario to increase significantly from 2016.

Domestic and foreign lenders were confident significant capital is available for good projects with experienced sponsors. Canadian lenders seemed to have a good amount of capital and were praising the flexibility offered by micro-perm tenors. Where European lenders may have slowed, Asian, particularly Japanese, lenders are increasing their presence in the Canadian market. While European banks expressed optimism, given market turmoil, it sounds as though the construction + 18 year tenors often seen from European banks may not remain the norm going forward and rates may not be as favourable from European banks given the cost of currency and Euro liquidity concerns.

The private equity and infrastructure fund panel was also optimistic. Because of their higher cost of capital, they tend to prefer projects with some issues where they can take on a more active role and provide more value-add.

Lenders suggest they are requiring a higher degree of due diligence for nuclear projects in the wake of the Fukushima disaster. There may be possibilities for new builds in Saskatchewan and New Brunswick, and maybe Ontario as well though there are conflicting messages coming out of Ontario in this regard.

Some activity in transmission line building is expected in the short term in particular to connect new energy to the grid: from Southern Alberta, down from Fort McMurray, and in Ontario along the north shore of Lake Superior. A current project running from Québec down to New York City is benefitting from little community pressure given the use of high-voltage direct current (HVDC) technology that is installed underground.

The topic of community and First Nations involvement featured prominently throughout the conference. Developers stressed that by engaging with local communities at the earliest stages of a project, maintaining transparency, and investing in the local economy, renewable energy projects are increasingly gaining widespread support not only for providing cleaner energy but also for stimulating economic development in otherwise stagnant regions of the country.

Voluntary guidlines for fracking

Stikeman Elliott LLP — Wed, 01 Feb 2012 17:11:12 -0500

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

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

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

International round-up: climate change measures developing in 2012

Stikeman Elliott LLP — Tue, 31 Jan 2012 10:29:10 -0500

Kim Lawton and Annie Pyke -

The past year was an eventful period in the area of emissions trading and climate change regulation and policy development and 2012 is showing no signs of slowing down. Globally, climate change measures are encountering both resistance and successes as the world’s nations struggle to control greenhouse gas (GHG) emissions. This blog post contains a rundown of some key stories we see developing in the coming months and which we will monitor and describe from time to time in this blog.

North America:

Canada has announced that it will formally withdraw from the Kyoto accord and the United States federal government has shown persistent opposition. In fact, a major European bank recently closed its US carbon trading business in a sign that there continues to be uncertainty regarding North American emissions trading systems.Even so, there is considerable policy development in the absence of national standards, as state and provincial-level governments are leading the way toward controlling GHGs.

As described in an earlier blog-post, Quebec is working toward launching a cap-and-trade system regulating greenhouse gas emissions. It will be the first Canadian province to start enforcing cap-and-trade regulations for carbon emissions. Quebec Environment Minister Pierre Arcand said that from January 1, 2013 onward the ceiling for allowable emissions will gradually become stricter.

The California Air Resources Board has designed a cap-and-trade program which started implementation activities on January 1, 2012, with an enforceable compliance obligation beginning in 2013. Currently, the first auction is scheduled for August 15, 2012. The program is aiming to bring transportation fuels under the cap by 2015, at which point 85% of the industry in California will be covered. California is also working closely with British Columbia, Ontario, Quebec and Manitoba through the Western Climate Initiative (WCI) to develop a harmonized cap-and-trade system.

Europe:

In Europe, the EU Emissions Trading System (ETS) is marching forward despite resistance from outside the union. The ETS has recently been validated by a European High Court of Justice (ECJ) ruling that the inclusion of the aviation industry in the ETS was valid under international law. The ruling came under heavy fire from China and United States, which have criticized Europe’s “unilateral” approach and have threatened to disregard the system or take retaliatory measures.

Oceania:

Australia and New Zealand have revealed plans to link their emissions trading systems as soon as 2015. Australia plans to move from a fixed carbon tax to a flexible price mechanism so as to be compatible with New Zealand’s program. The combined scheme would create the largest emissions trading system outside of Europe. It would also help to lock-in the system as, once the systems are linked, it becomes more difficult for either country to cancel their respective system. This is a particular benefit for Australia as the carbon tax scheme narrowly passed through the country’s lower house.

China:

Chinese state media reported that the Chinese government has announced plans to launch a carbon trading system across seven carbon exchanges by 2013 and there has also been some talk of using a carbon dioxide tax to curtail GHGs. The pioneering carbon exchanges are facing some challenges – such as a lack of technical knowledge but no change in plans has been announced.

We will follow these and other initiatives carefully on this blog and look forward to an interesting year ahead!

Positive outlook for Canadian power M&A

Stikeman Elliott LLP — Thu, 26 Jan 2012 16:16:23 -0500

The outlook for M&A activity in the Canadian power sector is positive, according to participants in a panel discussion at the Canadian Power Finance Conference on January 25th. Factors cited by the panel, which was moderated by Lewis Smith of Stikeman Elliott's Toronto office, included:

ongoing turmoil in the financial markets continues to create demand for stable, long-term investments and has lowered the return expectations for many classes of investor
lower return targets support higher asset valuations, which is motivating those vendors who have been holding out for higher prices
large pools of equity capital dedicated to power investments have been raised and pressure will continue to build for these funds to be deployed
the end of the cash grant program and looming expiration of the renewable electricity production tax credit in the US is causing American investors to look to Canada for new opportunities
low gas prices, which drive pricing in the US merchant market, and a scarcity of PPAs in the US, make contracted projects in Canada attractive to US developers
there is increasing interest in the Canadian power sector from European investors facing challenges in their home markets
Asian buyers continue to seek strategic opportunities in both renewable and non-renewable power generation in Canada
a dwindling supply of prime greenfield sites is causing developers to turn to acquisitions in order to secure locations for new projects
smaller developers facing financing constraints will need to sell or bring in equity partners with deeper pockets, particularly for projects with looming commercial operation deadlines under their PPAs
many smaller developers also do not have the expertise or capacity to bring projects from development into commercial operation and will be motivated to divest or partner with investors who do have these capabilities.

This wide range of factors is expected to drive M&A activity in 2012 for projects at all stages, from early development through to commercial operation. However, the European financial markets crisis could very well be a strong countervailing factor, so Canadian power market players will continue to look nervously across the Atlantic this year.

Record bid by Shell Canada secures Nova Scotia offshore exploration rights

Stikeman Elliott LLP — Fri, 20 Jan 2012 13:06:43 -0500

Lewis Smith

Shell Canada Limited has been awarded exploration rights by the Canada-Nova Scotia Offshore Petroleum Board on four parcels of offshore lands located approximately 200 kilometers off the southwest shore of Nova Scotia. The area is largely unexplored, but recent geological work funded by the Province of Nova Scotia indicates it has significant oil and gas potential. Government officials have credited this work, the results of which were publicly released, with creating renewed interest in offshore exploration in the region. The Shell Canada initiative will be the first major exploration project in the province in ten years.

Shell Canada’s bid commits it to spend a total of $970 million on exploration activities during the first six years of its nine year licence. These expenditure bids are the highest ever received by CNSOPB. A deposit of 25 percent of the bid amount will be required to secure Shell’s commitment.

The awards were based solely on the amount of money committed to exploration of each parcel. Bidders were required to demonstrate experience drilling deep-water exploration wells in the last ten years. Four other parcels included in the process received no bids.

CNSOPB’s next call for bids will be issued in May 2012. Industry members may nominate parcels to be included in this round until March 16, 2012.

President Obama denies Keystone XL application

Stikeman Elliott LLP — Fri, 20 Jan 2012 12:54:45 -0500

Gus Lu

On January 18, 2012, the U.S. State Department recommended to President Obama that the Presidential Permit for TransCanada Corp.’s Keystone XL pipeline be denied. President Obama concurred with this recommendation, which according to a State Department spokesperson was “predicated on the fact that the Department does not have sufficient time to obtain the information necessary to assess whether the project, in its current state, is in the national interest”.

The State Department’s reference to the time constraint refers to the Temporary Payroll Tax Cut Continuation Act of 2011 (“Act“), passed by Congress and signed by President Obama on December 23, 2011. Subsection 501(a) of the Act provided that the President had 60 days from the enactment of the Act to issue a Presidential Permit for the Keystone XL pipeline. Under Subsection 501(b), the President did not have to issue the Presidential Permit if he determined that Keystone XL was not in the national interest.

Had the Presidential Permit been granted under Subsection 501(a), Subsection 501(d) would have required the Permit to provide for a reconsideration of the route of Keystone XL within the State of Nebraska, and to provide a review period for the new route. Keystone XL’s route through Nebraska has been a controversial issue due to its location relative to the heavily-utilized Ogallala aquifer.

On November 14, 2011, TransCanada entered an agreement with the State of Nebraska to amend Keystone XL’s route to bypass the Sandhills region that sits atop the Ogallala aquifer. That development followed the State Department’s ruling that required TransCanada to examine new routes, and President Obama’s announcement indicating that his decision would be delayed until after the 2012 Presidential elections.

Following President Obama's announcement, TransCanada stated that it intended to re-apply for a Presidential Permit and expected the new application to be processed in an expedited manner.

Energy Board Jumps in the tub

Stikeman Elliott LLP — Mon, 16 Jan 2012 16:16:32 -0500

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.

The OEB directed this novel arrangement last month in the Canadian Distributed Antenna Systems Coalition case and last week, permanently codified it in amendments to the Board’s Rules of Practice and Procedure. The amendments stipulate, among other things, that the Board may require two or more experts to:

confer with each other in advance of the hearing for the purposes of narrowing issues, identifying points on which their views differ/agree and preparing joint written statements to be admissible as evidence at the hearing; and
appear together at the hearing as a concurrent expert panel for the purposes of answering questions from the Board and others and commenting on each other’s views.

The practice of hot-tubbing originated in Australia and has incrementally spread to other jurisdictions – notably, it was recently incorporated into Canada’s Federal Court Rules.

Proponents of the practice say it increases efficiency by allowing adjudicators to more easily distil complex technical matters and pin down areas where experts differ. Perhaps, most importantly, proponents argue that it discourages experts from acting as advocates and overstating their opinions – Justice Binnie observed that “experts testifying in the presence of one another are likely to be more measured and complete in their pronouncements, knowing that exaggerations or errors will be pounced upon instantly by a learned colleague”.

Conversely, detractors argue that having competing experts testify together can devolve into a free for all and, far from reducing expert partisanship and advocacy, it may actually promote it by attaching less importance to expertise and placing a premium on experts’ ability to out-debate their colleagues.

The OEB rule amendments are broad and will give OEB panels significant latitude in deciding how to employ this practice. Certainly, it will be of great interest to the sector – and other administrative tribunals in general - to see how this unfolds.

Ontario amends property tax treatment of renewable energy installation

Stikeman Elliott LLP — Wed, 11 Jan 2012 08:42:55 -0500

James Klein and Annie Pyke -

On January 4, 2012, Ontario amended O. Reg. 282/98 under the Assessment Act to provide new rules with respect to the assessment of property taxes on renewable energy installations. These amendments apply to facilities that generate electricity using solar energy, wind energy or anaerobic digestion of organic matter. The amendments differentiate between rooftop and ground solar installations, as well as between entities whose primary business is the generation, transmission or distribution of electricity (corporate power producers) and persons who are not ordinarily in the business of electricity generation (ancillary producers).

For rooftop solar installations the amendments provide that the assessment and tax classification of property will not change due to the addition of a renewable energy installation on the rooftop of a building. For ground-mounted installations, the property tax treatment will depend upon the size and location of the facility as well as who is conducting the generation. Corporate power producers will be taxed at the industrial rate, regardless of the size of the facility. With respect to ancillary producers, no changes were made with respect to ancillary producers up to 10 kW. Ancillary producers of greater than 10 kW of solar or wind energy will be taxed at the surrounding land use rate for up to 500 kW and then at the industrial rate for the proportion over 500 kW. On-farm anaerobic digesters over 10 kW, which are operated by farmers, will be taxed at the surrounding land use rate regardless of size. These amendments took effect as of January 1, 2011.

Quebec adopts greenhouse gas emission regulation

Stikeman Elliott LLP — Tue, 20 Dec 2011 11:12:50 -0500

Jason Streicher -

On December 14, 2011, the Government of Québec officially adopted the Regulation respecting the cap-and-trade system for greenhouse gas emission allowances (the Regulation) which is based on the rules established by the Western Climate Initiative (WCI).

The Regulation will come into force on January 1, 2012. The first year of the system will be a transition year which will allow emitters and participants to familiarize themselves with how the system works. In 2012, emitters and participants will be able to register with the system, take part in pilot auctions and buy and sell greenhouse gas (GHG) emission allowances on the market. No reduction or capping of GHG emissions will be required during this transition year.

The capping and reduction of GHG emissions will start officially on January 1, 2013. Starting on January 1, 2013 some 75 operators, primarily in the industrial and electricity sectors, whose annual GHG emissions equal or exceed the annual threshold of 25 kt CO2e (25 thousand tonnes of carbon dioxide equivalent), will be subject to the capping and reduction of their GHG emissions.

Starting on January 1, 2015, the operators of businesses that distribute fuel in Québec or import fuel for their own consumption, and whose annual GHG emissions due to its combustion reach or exceed the annual threshold of 25 kt CO2e, will also be subject to capping and reduction.

The Government of Québec has stated that, unlike traditional regulation, where companies must not exceed an emission standard (a strict limit on the discharge of pollutants), the cap and trade system will give companies flexibility in planning their short, medium and long term investments. In effect, the system will allow companies to buy emission allowances on the market until they are ready to modernize or replace certain equipment. Companies that reduce their GHG emissions below the regulatory requirement would have an allocation of emission units that is higher than what they actually produce. By selling their excess units, such companies could either recover part of their investments or use the proceeds to engage in further optimization.

Links to our previous blogs on this Regulation are available here.

Delay for Proposed Greenhouse Gas Limits on Oil Refineries

Stikeman Elliott LLP — Mon, 19 Dec 2011 17:56:42 -0500

Gianfranco Matrangolo -

The U.S. Environmental Protection Agency (“EPA”) will delay proposing the country’s first-ever greenhouse gas limits on oil refineries. The EPA agreed to implement these regulations under a settlement agreement (“Settlement“) that stemmed from two multi-state lawsuits where environmental groups sought court orders to require the EPA’s action on greenhouse gas regulation.

Pursuant to the Settlement, the EPA agreed to propose standards for oil refineries by December 10, 2011, and to enact the new regulations by November 10, 2012. According to a spokeswoman for the EPA, “the EPA expects to need more time to complete work on greenhouse gas pollution standards for oil refineries.” The EPA did not meet the December 10 deadline for the standards but is currently working with the litigants from the Settlement to set a new date for submitting the proposed standards. It is unclear whether the EPA will also miss the deadline to enact the regulations.

Enbridge's Northern Gateway gains Gitxsan First Nation's support despite Save the Fraser Declaration

Stikeman Elliott LLP — Mon, 19 Dec 2011 17:43:32 -0500

Gus Lu -

On December 2, 2011, Enbridge Inc. entered into an equity participation agreement with the Gitxsan First Nation, pursuant to which Enbridge will assist the Gitxsan First Nation in purchasing a stake in the proposed $5.5 billion Northern Gateway pipeline which has the potential to result in $7 million in profits for the Gitxsan over the project’s lifetime. Northern Gateway’s proposed route does not cross the Gitxsan First Nation’s territory, although the route passes several tributaries which feed into a lake used by the Gitxsan.

This announcement arrived shortly after 61 British Columbia First Nation groups signed the “Save the Fraser Gathering of Nations” declaration, a document which states that the federal process to approve Northern Gateway violates the signatories’ “laws, traditions, values and inherent rights as Indigenous People under international law.”

The federal Joint Review Panel, established by the National Energy Board and the Canadian Environmental Assessment Agency, will begin community hearings on Northern Gateway in Kitimat, B.C. on January 12, 2012.

Constitutionality of assessments for energy conservation and renewable energy programs upheld

Stikeman Elliott LLP — Mon, 12 Dec 2011 09:34:32 -0500

Patrick Duffy and Christopher Yung -

On December 8, 2011 the Ontario Energy Board dismissed a motion by the Consumers Council of Canada (CCC) challenging the constitutionality of the Board’s assessments to recover costs in respect of energy conservation or renewable energy programs.

The assessment is made under the Ontario Energy Board Act, 1998, to recover costs associated with the Home Energy Savings Program and the Ontario Solar Thermal heating Initiative. It is imposed on licensed electricity distributors and the Independent Electricity System Operator (IESO). In turn, distributors and the IESO pass the assessment onto their customers.

In its motion, CCC argued that the assessment was an indirect tax, and therefore outside of the constitutional powers of the provincial government. Under the Constitution Act, 1867, Canada’s provinces do not have the jurisdiction to enact or authorize the imposition of indirect taxes.

The issue before the Board was whether the assessment was properly characterized as a regulatory charge or an indirect tax. The Board considered the Supreme Court Canada’s five identified features of a tax: (1) a tax is compulsory and enforceable by law; (2) it is imposed under the authority of the legislature; (3) it is levied by a public body; (4) it is intended for a public purpose; and (5) it is unconnected to any form of regulatory scheme.

The proceeding focussed on whether the assessment met the fifth feature. CCC argued that the assessment was not a regulatory scheme because the Board exercises little or no control over how the assessment was levied. Unlike its traditional rate-setting role, the Board determines the assessment by simply applying the formula stipulated in the regulations.

The Board disagreed with CCC’s narrow approach, and held that only where there appears to be no nexus whatsoever between a charge and a regulatory scheme would the charge fail under the test. Adopting a broad approach, the assessment and the funded programs were part of a complete and detailed code of regulation, in which energy conservation was only one part.

CCC also argued that the programs funded by the assessment were not attempts to regulate behaviour because they were voluntary. The Board disagreed and held that the programs, while voluntary, were still incentives which were clearly intended to affect behaviour. Even though not all consumers would participate in the programs, the programs were the result of all users’ electricity use and provided benefits for all users through improved grid reliability and environmental benefits.

Transmission line for renewable energy park approved

Stikeman Elliott LLP — Mon, 12 Dec 2011 09:12:10 -0500

Patrick Duffy and Daniel Suss -

Grand Renewable Wind LP (GRW) has received approval from the Ontario Energy Board to construct a new transmission line and associated facilities for the Grand Renewable Energy Park (GREP) located in Haldimand County. The Board’s approval is subject to GRW obtaining all other necessary approvals, including its Renewable Energy Approval for the GREP, and complying with certain mitigation measures.

GRW’s application was one of first leave to construct applications since the enactment of the Green Energy and Green Economy Act, 2009 and it raised novel issues that the Board has not considered before. Of particular interest in this case was a request from Haldimand County Hydro Incorporated (HCHI) for access to GRW’s transmission facilities so that HCHI could connect a new transformer station for its distribution system. GRW denied that it had an obligation to provide HCHI with access to its transmission facility.

The dispute centred on whether GRW, a partnership of Samsung and Pattern, should be treated like a typical transmitter, which would carry with it a requirement to be licenced and an obligation to provide access. Generally, transmission lines operated by generators are exempt from these obligations provided the line carries the generator’s energy. The unique twist in this case is that the transmission line will not just carry energy from GRW’s wind farm, but also from a solar facility that will operated by a different entity as part of GREP.

GRW argued that it was exempt from the requirement to hold a transmitter’s licence because it would be generator and would transmit power from the solar project at cost. Board staff and other intervenors disagreed with this argument. In its decision, the Board acknowledged the issue was important, but determined that it was not necessary to decide the issue as part of a leave to construct application.

It is not clear from the decision how the Board intends to resolve this issue. If HCHI intends to pursue the issue, it could make a specific application for access to GRW’s transmission facilities. Alternatively, the Board could convene a generic proceeding under its Transmission System Code to deal with the matter more generally.

Canada not planning to renew Kyoto Protocol targets: update from Durban

Stikeman Elliott LLP — Wed, 30 Nov 2011 09:31:31 -0500

Annie Pyke -

Canada is moving away from its historical positions on climate change at the 17th Conference of the Parties to the United Nations Framework Convention on Climate Change, currently being held in Durban, South Africa. Canada, which signed on to the original Kyoto protocol in 1997, has stated that it will not commit to any further emission reduction targets after the expiry of the first commitment period in 2012. The Kyoto protocol sets legally binding emissions cuts for most major economies but exempts developing nations, including China, India and Brazil, from such cuts. Japan and Russia have also indicated that they do not intend to commit to any further targets under the Kyoto protocol. The European Union, Australia and New Zealand continue to support the Kyoto protocol. Canada instead has chosen to endorse the 2009 Copenhagen accord, which would require commitments from all major emitting countries, not just developed nations. Although many countries have released targets, the Copenhagen accord has yet to become a binding treaty. Canada has also raised concerns over the planned $100-billion per year climate fund. The climate fund, which was agreed upon during last year’s climate change negotiations in Cancun, Mexico, is meant to help developing countries adapt to climate change, but the design of the fund has yet to be agreed upon. Canada’s positions are in line with those of the United States, which has refused to sign on to any binding emissions reductions that do not require the major emerging countries such as China, India and Brazil, to be required to reduce emissions.

Ontario Private Member's Bill seeks to amend Green Energy Act

Stikeman Elliott LLP — Tue, 29 Nov 2011 15:46:49 -0500

Annie Pyke -

A bill introduced by Todd Smith, MPP for Prince Edward – Hastings, proposes amendments to the Green Energy Act, 2009 (the Act) to allow municipalities to regulate green energy projects through by-laws. The bill, which has been titled the Local Municipality Democracy Act, 2011, would amend the sections of the Act which make by-laws inoperative with respect to designated green energy activities and would provide that by-laws respecting “…health, safety and well-being of persons or respecting public assets of the municipality…” would continue to apply to designated green energy activities. Currently, municipalities participate in the planning process for green energy activities through the Renewable Energy Approval process, which requires municipal and local authority consultation. The bill received its first reading on November 28, 2011 and is expected to receive its second reading on December 1st, 2011. While private members' bills rarely become law in a majority government, the fact that Ontario currently has a minority government may increase the chances of success for private members' bills.

Keystone XL rerouted to bypass Sandhills region

Stikeman Elliott LLP — Tue, 15 Nov 2011 10:54:24 -0500

On Monday, TransCanada Corp. announced that it reached an agreement with the Nebraska state government to amend the route of the proposed Keystone XL pipeline to bypass the Sandhills region, an environmentally sensitive area that sits atop the heavily-utilized Ogallala Aquifer. As part of the agreement, the state will fund studies to evaluate alternative routes.

Today, the Nebraska state legislature will consider the proposed law that will direct the Nebraska Department of Environmental Quality to prepare a supplemental environmental impact statement for the Nebraska Governor.

This development follows last week’s U.S. State Department ruling that required TransCanada to examine new routes, as well as an earlier announcement by President Obama indicating that the decision whether to approve Keystone XL would be delayed until after the 2012 Presidential elections. A U.S. State Department spokesman indicated that any agreement between the state of Nebraska and TransCanada will not alter the review process undertaken by the federal agency.

Alberta Provincial Court issues creative sentence for water use violation

Stikeman Elliott LLP — Mon, 14 Nov 2011 11:39:34 -0500

On October 31, 2011, the Alberta Provincial Court ordered an oilsands operator to fund an online training course in water diversion best practices that will be administered by the Canadian Association of Petroleum Producers (CAPP). Statoil Canada Ltd. plead guilty to the charge of breaching the terms of its temporary water licence by using water from unapproved sources, using unauthorized intake screens and under-reporting the volume of water diverted from a lake source.

The offences, which occurred from December 15, 2008 to May 29, 2009 near Conklin, Alberta, resulted in 19 charges that were reduced to one charge under a plea deal. The Provincial Court ordered a fine of $190,000, of which $5,000 will be paid outright and the remaining amount will be held in trust by CAPP to establish the industry training course.

This latest example in creative sentencing falls on the heels of the Alberta Provincial Court’s 2010 decision (discussed here) to issue a $3 million penalty against Syncrude Canada Ltd. to fund studies on bird deterrence and to restore migratory bird habitats.

Export License granted to Kitimat LNG Terminal

Stikeman Elliott LLP — Mon, 14 Nov 2011 11:31:59 -0500

On October 13, 2011, the National Energy Board (NEB) granted Kitimat LNG a 20-year license to export liquefied natural gas (LNG) from British Columbia. Apache Canada Ltd., EOG Resources Canada Inc., and EnCana Corp. are the proponents of the $5 billion project that would provide Canadian producers access to markets where LNG prices trade at between 3 and 4 times North American natural gas prices.

The license will allow Kitimat LNG to export 10 million tonnes of LNG a year. Apache and EOG’s shares of this volume represent more gas than Apache currently has in established reserves, and over the 20-year term, will use up almost all of EOG’s current reserves. Concerns over gas shortages, and the effect on gas prices in North America were addressed by the NEB, stating that “the export of the proposed term volume is unlikely to cause Canadians difficulty in meeting their energy requirements at fair market prices.” In support of their statement, the NEB cited EnCana’s reserves, which are substantially greater than its export commitment, and the development of shale gas resources as sufficient gas sources to satisfy the increase in demand from the Asian market.

Australian carbon tax plan becomes law

Stikeman Elliott LLP — Fri, 11 Nov 2011 13:54:48 -0500

Annie Pyke -

Further to our October 19, 2011 post, Australia’s carbon tax legislation was passed by the upper house Senate, officially making it the second major economy, after the European Union, to pass such legislation. New Zealand has a similar plan, while China and South Korea are currently working on trading programs and South Africa plans to put a limit on carbon emissions by top polluters. The legislation includes a fixed carbon tax of A$23 a tonne on the top 500 polluters from July 2012, with a move to an emissions trading scheme in July 2015, but provides that emission-intensive export industries will receive 94.5% of carbon permits for free during the initial three years. The $A23/price is almost double the current European cost of between $8.70 and $12.60/tonne. In an effort to spur clean energy investment, the legislation allocates A$13 billion in funding for renewable energy and low emissions projects. The Australian government is hoping that the passage of this legislation will help encourage the creation of a global agreement on emissions at the Conference of the Parties to the United Nations Framework Convention on Climate Change, to be held in Durban from November 28 – December 9, 2011.

Canadian Energy Law

3rd Annual Canadian Power Finance conference: outlook for 2012 and beyond

Voluntary guidlines for fracking

International round-up: climate change measures developing in 2012

Positive outlook for Canadian power M&A

Record bid by Shell Canada secures Nova Scotia offshore exploration rights

President Obama denies Keystone XL application

Energy Board Jumps in the tub

Ontario amends property tax treatment of renewable energy installation

Top 5 Canadian energy stories of 2011

Quebec adopts greenhouse gas emission regulation

Delay for Proposed Greenhouse Gas Limits on Oil Refineries

Enbridge's Northern Gateway gains Gitxsan First Nation's support despite Save the Fraser Declaration

Constitutionality of assessments for energy conservation and renewable energy programs upheld

Transmission line for renewable energy park approved

Canada not planning to renew Kyoto Protocol targets: update from Durban

Ontario Private Member's Bill seeks to amend Green Energy Act

Keystone XL rerouted to bypass Sandhills region

Alberta Provincial Court issues creative sentence for water use violation

Export License granted to Kitimat LNG Terminal

Australian carbon tax plan becomes law