Canada: Energy @ Gowlings – August 2007

Last Updated: August 30 2007

Edited by Paul Harricks

  • Gowlings Energy and Infrastructure Group Welcomes Carlton Mathias
  • Fuel Balancing Critical to Ontario's Energy Future
  • Liability of Nuclear Suppliers Under Bill C-63
  • Hydro One Partners With Crime Stoppers to Reduce Metal Theft
  • New California Regulations Restricting Purchase of Electricity from Power Plants
  • Vancity Carbon Offset Program

Gowlings Energy and Infrastructure Group Welcomes Carlton Mathias

We are pleased to welcome Carlton Mathias to Gowlings' Toronto office. Carlton has joined the firm as a partner in the National Energy and Infrastructure Industry Group where he will continue to focus his practice in both regulatory and commercial matters in the energy and infrastructure sectors.

Carlton brings to Gowlings extensive experience gained while working in the Ontario Ministry of Energy and working with senior officials from Ontario Power Generation, the Ontario Power Authority, Hydro One and Ontario's Independent Electricity System Operator. While at the Ministry, Carlton led the negotiations between Ontario and Québec for the construction of a new 1,250 MW interconnection and with Manitoba for the transfer of up to 2,000 MW of clean energy to Ontario. Carlton also has substantial civil and commercial litigation experience gained at another national law firm.
By Michael Morrison

Fuel Balancing Critical to Ontario's Energy Future

Despite ascertations made in a recent report entitled "Renewable is Doable", Ontario cannot afford to underpin its energy future simply on what is "doable". Certainty is needed, and that's why nuclear and gas-fired power must be part of our future energy mix. And because even certainty requires insurance, don't put out the lights on the "c" word in electricity just yet.

Following the release of the joint analysis "Renewable is Doable" by the Pembina Institute and WWF–Canada, WWF–Canada climate change campaign chair, Keith Stewart, suggested that the lights can be kept on without coal or nuclear power and that more localized renewable energy projects would be more efficient since they will reduce the amount of energy lost through transmission. Despite the widespread perception, the unfortunate reality for Ontarians is that we are not blessed with the geography of Quebec, and so do not have an abundance of water power. Moreover, most of our renewable energy, in the form of water and wind, is either in remote areas of the province and very expensive to develop in small quantities for nearby consumption, or subject to enormous transmission costs to move it to urban centres. While the sun shines and the wind blows in Ontario, these natural wonders do not occur with the consistency needed to power our sophisticated economy on their own; nor does the solar power technology exist to convert sunlight into electricity cheaply enough in the quantities needed.

Currently, Ontario manages with a diverse supply of fuel sources for electricity generation broken out as follows: water power – 26%; other renewables (wind, solar etc.) – 1%; fossil fuels (coal, gas, oil) – 32%; and nuclear power – 41%.

Last summer, on August 1, 2006, Ontario achieved its record power demand at 27,005 megawatts (MW), which the province weathered well. To give this number some context, the nameplate capacity for water power generated at the Sir Adam Beck facilities in Niagara Falls is 2,000 MW and the total installed capacity of water power in the province is 8,150 MW. Add to this all other forms of renewable energy and the installed capacity of renewable energy is less than 9,000 MW. On that August 1st, the lights remained on with all of our diverse supply running at full tilt, and not without a little help from our transmission lines importing power also generated from a variety of fuel sources.

While high peaking days like August 1st cause unique challenges and grab headlines with public appeals for consumption cut-backs, these peaks float above the steady and steadily increasing (calculated at about 1% per year) loads which are the engines of our economy. These loads require large amounts of consistently dependable and affordable power. Add to this that, due to demand growth and generation retirement, by 2025 there will be a gap equal to approximately 80% of Ontario's current installed generation capacity, it's obvious that the Ontario electricity landscape is anything but static.

So can Ontarians look forward to counting solely on renewable energy sources and conservation to keep our system – and economy – unfalteringly humming? Absolutely not, at least anytime soon. Ontario needs not only clean power, but it needs enough electricity available at all hours of every day for boiling water in our kitchens and powering boilers in our factories. Those in the exclusively renewable camp and those in the anti-nuclear camp often join forces and point to Germany as a jurisdiction with a highly productive economy that has a multi-party agreement to banish nuclear power plants within its borders by 2021. What rarely gets mentioned is that a key to Germany's plan is a significant reliance on coal and the hope of clean coal-fired plants in the future. In the meantime, Germany is subsidizing the construction of new coal plants through carbon-credit subsidies while about 40 coal-fired generators are on the planning books without any provision for capturing greenhouse gas emissions. Furthermore, most energy experts predict that once the nuclear plants are gone in Germany, the country will import significant amounts of power from France, a country that produces about 80% of its electricity from nuclear power plants.

The clichéd complaints about building new non-renewable sources of power are that they are expensive, require long lead times to be brought into service and make or leave large environmental footprints. While in part these criticisms are true, unfortunately, they are true for new renewable power too. An oft-suggested solution for Ontario is that it simply purchase large amounts of renewable energy from the provinces which have it. As can be expected, however, these jurisdictions have the interests of their own constituents to protect and the power is not offered to Ontario at Boxing Day prices. Ontario must compete to purchase this power and competition for a limited supply of a good thing drives prices up.

Moreover, like non-renewable power plants, renewable projects require billions of dollars of infrastructure investment for the necessary dams, access roads, turbines, powerhouses and thousands of kilometres of high voltage transmission lines. Lay over top of this the fact that people everywhere seem to want clean power but no one seems willing to have the attendant infrastructure situated near them: some people even go so far as to cloak their particular self-interested concerns as environmental ones. All of this makes for long delays for project proponents to obtain the multitudes of necessary permits and approvals.

Adding to the complexity is a facto that usually applies more to new renewable projects than non-renewable ones: in many instances, the sites for the best renewable supply are situated in lands over which First Nations claim traditional territory rights or treaty rights or both. While many First Nation communities are in favour of development in their traditional territories, they too may not speak with a united voice. They too may be divided over whether there should be development over their traditional lands and, if so, how much and on what conditions.

Lastly, in considering environmental footprints, to supply Ontario's high-powered economy with exclusive or even primarily renewable power, the new footprint may make it look like we've been taking only baby steps all along. There would need to be a wholesale transformation of the landscape – including damming and flooding massive tracts of land, multiple forests of massive wind turbines and the blanketing of vast acres of prime farmland withsolar panels. Already, there is no shortage of resistance in Ontario by people who do not want wind and solar generation plants built near them.

For Ontario to meet its demand for sources of inexpensive reliable electricity, there simply is no silver bullet fuel. Ontario must continue on its intended path to craft a supply mix that trades among the advantages and disadvantages of available fuel sources. Each of nuclear, natural gas, water, wind, solar, biomass and conservation have their place in our energy future. And while the "c" fuel is sought to be ushered out the door as fast as we can bid it farewell, the fact is that its infrastructure is in place, it's reliable, cheap and abundant. Be prepared for the fact that coal may keep the compact fluorescents glowing white, and the rooms cool day and night, while the people fight to put the renewables and non-renewables alike in somebody else's backyard.
By Carlton Mathias

Liability of Nuclear Suppliers Under Bill C-63

The federal government has introduced Bill C-63, An Act to Amend the Nuclear Liability Act (Bill C-63). There has been some confusion in the public domain as to whether the proposed legislation introduces a new exception to the absolute liability of a nuclear operator upon the occurrence of a nuclear incident. In particular, the confusion revolves around an interpretation that gross negligence by suppliers of nuclear goods and services will no longer be protected from liability under Bill C-63.

Section 8(1) of Bill C-63 provides: "An operator - and no person other than an operator - is liable for damage caused, within Canada or in the exclusive economic zone of Canada, by [a nuclear incident]". This is consistent with Section 11 of the Nuclear Liability Act (Canada) (NLA) which currently provides: "Except as otherwise provided by or pursuant to this Act, no person is liable for any injury or damage attributable to a breach of duty imposed on an operator by this Act".

The allocation of nuclear liability between operators and other parties (including suppliers) is further dealt with in Sections 9 and 12 in Bill C-63 which state, respectively: "The liability of an operator for damage caused by a nuclear incident is absolute"; and "No operator has a right of recourse against any person, other than an individual described in Section 11 [see below], in respect of damage caused by a nuclear incident." Similar provisions are contained in Sections 4 and 10 of the NLA.

The confusion may stem from a new provision in Section 11 of Bill C-63 : "an operator is not liable for damage suffered by an individual if the nuclear incident that caused the damage was wholly or partly caused by an act or omission that the individual committed ... [recklessly and with the knowledge that injury or damage would probably result]". [Emphasis added.] The full text of Section 11 includes an additional exception to an operator's absolute liability where the damage is " ... committed with intent to cause injury or damage ... ". But for the addition of the highlighted clause, Section 11 is substantially similar to the current provisions in Section 8 of the NLA.

An analysis if Section 11 of Bill C-63 does not support the conclusion that acts of gross negligence by suppliers of nuclear goods and services will no longer be protected from liability under the proposed amending legislation. The reckless conduct and knowledge components in Section 11 are well understood concepts in criminal law. They are the basis of the necessary mens rea (i.e. guilty mind) required for conviction in most criminal charges. Such analogy is consistent with the statutory language of "intent to cause injury or damage" which is part of this Section. Section 11 of Bill C-63 (and its counterpart in the NLA, Section 8) do not relieve an operator from its absolute liability for damage caused by a nuclear incident in circumstances contemplated by Section 11; it merely exempts the operator from liability for damages suffered by a claimant who commits an act of sabotage.

Under Canadian tort law, there is no readily identifiable or understood distinction between "negligence" and "gross negligence". "Gross negligence" is not a term that is in regular use in Canadian courts. Particularly egregious conduct of a tortfeasor may affect a court's decision on liability and damages, but it will not bring such conduct under a distinct head of liability or damages known as "gross negligence". In any event, neither "negligence" nor "gross negligence" is synonymous with the reckless conduct and knowledge elements of Section 11. Supplier negligence in the delivery of goods or services for use in a nuclear installation falls short of the concept of intent associated with damage caused by reckless indifference.

It is also interesting to compare the reference to conduct of "an individual" in Section 11 of Bill C-63 with its counterpart in Section 8 of the NLA, that is, conduct of "a person". The term "person" is undefined and used in the NLA as a reference to both individuals and a broader group of entities including corporations. This variable use is the basis of negotiations in nuclear supply contracts for contractual indemnification by a nuclear operator for nuclear damage resulting from sabotage by a rogue employee. The use of "an individual" in Section 11 of Bill C-63 arguably provides nuclear suppliers with additional statutory protection from this liability.
By Terry McNally

Hydro One Partners With Crime Stoppers to Reduce Metal Theft

Hydro One and Crime Stoppers have joined forces to combat the huge increase in metal theft across the province. Hydro One is contributing $10,000 to Crime Stoppers to aid in raising awareness of the impact of stealing copper conductors used by Hydro One on its power lines. Given the rise in copper prices, copper theft has increased by approximately 1,150 per cent from 2005 to 2006 and is now costing the company about $1 million a year. These thefts are a serious issue, not only because any contact with an energised power line can result in electrocution, but contact also threatens the safety of both the general public and Hydro One staff, and negatively affects electricity reliability.

Aside from increasing security systems and undertaking investigations of copper/metal thefts, Hydro One is hoping this partnership can increase identification of metal thieves and the buyers of stolen metal. Any citizen with information can call 1-800-222-TIPS. Crime Stopper takes information 24 hours a day, seven days a week and callers never have to identify themselves or testify in court.
By Nicole Chen

New California Regulations Restricting Purchase of Electricity from Power Plants

A new set of regulations has been approved by the California Energy Commission that will limit the purchase of electricity from power plants that fail to meet strict greenhouse gas emissions standards. These new regulations, which are part of SB 1368 (Petra), prohibit California's publicly owned utilities from entering into any long-term financial commitments with plants that exceed emissions of 1,100 pounds of carbon dioxide per megawatt hour.

SB 1368 was implemented as part of the Energy Commission's further implementation of AB 32 (Nunez), a bill that called for California to reduce emissions by 25 percent by 2020. SB 1368 directed the Energy Commission, in partnership with the California Public Utilities Commission and the California Air Resources Board, to establish a greenhouse gas emission performance standard for power plants. This standard was reached by evaluating existing combined-cycle natural gas baseload power plants across the west and is the same carbon dioxide measure approved by the California Public Utilities Commission.

For more information, please refer to: www.energy.ca.gov
By Nicole Chen

Vancity Carbon Offset Program

Vancity is Canada's largest credit union with about $12.3 billion in assets and over 360,000 members. Recently, it launched a Carbon Offset Program designed in consultation with the David Suzuki Foundation, Ecotrust Canada, the Pembina Institute and The Natural Step.

This climate change program is the first of its kind and is expected to aid in providing coaching and financial support to Canadian non-profit and co-operative organizations working the fields of renewable energy and energy efficiency.

The financial support totals $100,000 per year and coaching will be provided by Vancity-approved project assessors who specialise in carbon emissions, and will work with the organizations to quantify their carbon reductions. Carbon offsets are reduction credits from another organization's project that result in lowered emission rates.

Aside from funding the projects and building expertise in this emerging field, the offsets provided by the projects through Vancity's program will be used by Vancity to meet its corporate target of being carbon neutral by 2010. Currently, Vancity's carbon emissions per employee is 50 per cent lower than other Canadian financial institutions so that its plan to be carbon neutral made three years ago is already well on its way. As part of its plan, Vancity launched aggressive programs to reduce its corporate emissions and overall environmental footprint. Should it not be able to reduce its carbon footprint, it will offset by investing in projects that fight climate change.

Vancity has estimated that it will need to offset 4,500 tonnes of emissions per year to reduce its carbon impact to zero. Previously, these offsets could only be purchased through emissions reduction and trading systems such as the Chicago Climate Exchange, but Vancity's program would not only support Canadian climate change innovation, it would also provide high quality, verifiable offsets for Vancity and other businesses.

For more information, please refer to: www.vancity.com/carbonoffsets
By Nicole Chen

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