- Changes to Nuclear Liability Legislation
- Phase Two Report of the Ontario Agency Review Panel
- Changes to National Instrument 51-101 Standards of Disclosure for Oil and Gas Reserves
- Federal Government Moves Closer Towards Regulating GHG's and Other Air Pollutants
- Indiana utility Regulators Approve Duke Energy Clean Coal Power Plant
- NERC: Strategic Plan 2008 - 2013
Changes to Nuclear Liability Legislation
The federal government is expediting passage of legislation to amend and replace the Nuclear Liability Act. This initiative is proceeding without the media attention or public debate that one might expect for the introduction of important new legislation, particularly on the sensitive nuclear file.
On October 30, 2007, Bill C-5 (the Nuclear Liability and Compensation Act) passed second reading in the House of Commons and was referred to the Standing Committee on Natural Resources for detailed review. Industry stakeholders made submissions to the Committee for amendments to the Bill and members of the Committee from the opposition parties similarly tabled motions for amendment; however, on December 12, 2007, just prior to adjournment of the House for the holiday break, the Committee reported Bill C-5 to the House of Commons without amendment.
Parliament is scheduled to return on January 28, 2008. Observers expect that the Bill will proceed quickly to third reading for adoption. This will be the final opportunity for debate and amendment by the opposition parties.
Once adopted by the House, Bill C-5 will go to the Senate. If the Senate chooses to refer the Bill to committee for further review, interested stakeholders may be presented with another occasion to make submissions for amendments.
Bill C-5 re-states the key principles of the liability regime established under the Nuclear Liability Act for damage caused by the occurrence of a nuclear incident in Canada, namely, that:
- The operator's liability is exclusive; that is, no person other than an operator is liable for damage caused within Canada; and
- The operator's liability is an absolute, strict liability requiring no proof of fault or negligence.
Similar to the Nuclear Liability Act, Bill C-5 provides for the establishment of an administrative tribunal to hear and decide claims where the Governor in Council believes it to be in the public interest to do so, having regard to the extent and the estimated cost of the damage. Upon establishment of the tribunal, the government will be responsible for payment of all compensation awards determined by the tribunal.
There are a number of important changes introduced by the Bill, the most significant being a massive increase in the maximum liability for operators from $75 million to $650 million. This increased liability will be reviewed at least once every five years by the Minister of Natural Resources and, if appropriate, the Minister would have the statutory mandate to increase (but not decrease) the maximum liability threshold by regulation without debate in the House of Commons or consultation with industry stakeholders.
Bill C-5 is identical to Bill C-23, the proposed amending legislation tabled in the last Parliamentary Session but which died on the Order Paper with the prorogation of Parliament in advance of the throne speech last October. Industry observers hope that this important legislation will not meet a similar demise due to closing of the current Parliamentary Session before passage of the Bill by the House and Senate, particularly for a spring election.
Phase Two Report Of The Ontario Agency Review Panel
On December 20, 2007 the Ontario Ministry of Energy released the Report of the Agency Review Panel on Phase II of its Review of Ontario's Provincially-Owned Agencies. At the same time the Minister of Energy issued a press release and sent a letter to the agencies involved indicating how he plans to move forward with the Report's recommendations. The Panel was chaired by James Arnett and the agencies that were under review are Ontario Power Generation Inc. (OPG), Hydro One Inc. (Hydro One), the Independent Electricity System Operator (IESO), the Ontario Power Authority (OPA), and the Ontario Energy Board (OEB).
In June of 2007 the Ministry released the Phase I Report of the Agency Review Panel which addressed executive compensation at Ontario's electricity agencies. Both reports are available on the Ministry of Energy's website at www.energy.gov.on.ca under Electricity/Agency Review Panel.
The Agency Panel Review Report
The terms of reference for the Phase II Report required the Agency Review Panel to:
- Review the roles and relationships among the five provincial agencies with a view to continuing improvements in operational performance, assessing potential overlaps between the agencies, and minimizing costs and maximizing effectiveness for Ontario consumers; and
- Examine human resource needs facing the sector and provide advice on recruitment, training and related strategies to address future needs.
The 44-page Report includes six appendices among them;
- A list of the organizations asked to provide input and the groups with whom the Panel met;
- A list of the current provincial and federal approval requirements for generation and transmission projects;
- A review of comparative approvals processes;
- Suggested principles for a provincial protocol on reviewing electricity projects;
- A summary of the cost efficiency activities provided by the Agencies; and
- A 63-page report entitled "Human Resource and Skill Needs facing the Ontario Electricity Sector" by the Electricity Sector Council (a not-for-profit corporation dedicated to the development of the electricity industry workforce in Canada). It was engaged to provide information about the supply and demand profile for labour in the electricity sector in Ontario and the readiness of the Ontario educational sector and the electricity agencies to meet future workforce demands.
Energy Minister's Reaction To Agency Review Panel Report
In the Ministry of Energy Press Release Minister Gerry Phillips stated that the recommendations in Phase II of the Agency Review Panel Report will help "strengthen Ontario's long-term plan for a secure, reliable and affordable electricity supply."
He added that: "Our agencies have helped put Ontario's electricity sector back on track, and they will all continue to play a vital role. Now is not the time to implement institutional change in the sector. At the same time, the report makes prudent and helpful suggestions for the future as the sector develops. We'll be taking their advice to heart as we move forward and seek out appropriate opportunities for streamlining."
The key recommendations of the Agency Review Panel cited in the press release were:
The 44-page Report includes six appendices among them;
- Ensuring a fulsome, integrated process among agencies for the approval of electricity projects;
- Continuing the independence of Ontario's Chief Energy Conservation Officer, to ensure regular reports on Ontario's conservation progress;
- Creating new tools to ensure a continued and growing supply of expertise and skilled workers to meet the needs of Ontario's energy future; and
- Continuing to facilitate the consolidation of local distribution companies, which deliver electricity to homes and businesses.
The press release indicated that Minister Phillips is committed to pursuing quickly the need to address the industry's human resources challenge.
In his letter to each Agency Chair, the Minister provided specific comments on overlap and duplication, approvals processes, OPG, local distribution companies, connection assessments and human resource skill needs. The Minster emphasized the need for stability and that any change should only be made when it is reasonable to do so. Although he agreed with the Panel's recommendation to reduce areas of overlap and duplication with regard to conservation and demand management (CDM), he did not specifically address the recommendation with respect to redistributing the CDM functions of the OPA; nor did he address the recommendation that the balance of the OPA functions be combined with those of the IESO.
Although the Minister noted the need for expeditious approval of near-term projects identified in the initial Integrated Power System Plan (IPSP), he did not comment on the specific Panel recommendations for a single integrated approvals process as set out in the Phase II Report's appendices. He did, however, indicate his agreement with the recommendation to continue policies that facilitate the consolidation of local distribution companies. The Minister also agreed with the Panel's recommendations concerning "new tools to develop a future pool of talented energy professionals" and he plans to discuss them with the Minister of Training, Colleges and Universities.
The Minister pointed out that the government continues to work very closely with OPG "to provide ongoing clarity with respect to its future role in the context of the government's longer-term energy plan, including its role in new generation." He also agreed with the recommendation for more cooperative efforts regarding connection assessments and asked the IESO and Hydro One to begin developing a uniform approach to connection assessments to reduce any existing overlap, duplication or inefficiencies.
Consolidated Recommendations Of Agency Review Panel
The Phase II Report provided the following consolidated recommendations:
- That, when it seems reasonable to the Minister to do so, the CDM functions of the OPA be redistributed as follows:
- responsibility for designing and administering conservation programs, education and advocacy and assisting in the development of standards for electricity efficiency be transferred to the Ministry of Energy; and
- the Chief Energy Conservation Officer be made an officer with sufficient independence to ensure confidence in the numbers being filed with the Minister, detailing Ontario 's progress in meeting its goals relating to the development and implementation of electricity conservation and load management measures.
- That, when it seems reasonable to the Minister to do so, but probably not before the OEB has completed its current review of the initial IPSP, the balance of the functions of the OPA be combined with those of the IESO into a combined agency.
- That Hydro One and the IESO work together to develop a uniform approach to connection assessments that is consistent with the requirements of the Transmission System Code in order to reduce overlap, duplication and inefficiencies, for the benefit of existing and potential consumers.
- That, to ensure the timely consideration of urgent projects set out in the IPSP or otherwise, the government establish an understanding or protocol among its various ministries and regulatory tribunals to create, on a temporary basis and using existing legislation, a single integrated approvals process for electricity projects based upon existing legislative authorities.
- That the government enact legislation that would create a single integrated approvals process for electricity projects on a permanent basis.
- That the Minister of Energy provide greater clarity as to OPG's role, particularly with respect to:
- new generation other than hydroelectric;
- its ability to enter into power purchase agreements; and
- whether it should be fully, instead of partially, regulated by the OEB.
- That provincial policies to facilitate the consolidation of local distribution companiess be continued.
- That the government of Ontario establish an Ontario Electricity Sector Council that would jointly report to the Minister of Energy and the Minister of Training, Colleges and Universities. Members of the Council should include representatives from employers, labour and the education and training bodies. The Ontario Electricity Sector Council could undertake several important activities, including:
- Ensuring better and more targeted support for laid-off workers, particularly from the manufacturing sector, who need retraining to move into electricity sector jobs.
- Raising the sector's profile and improving its appeal to students, parents and the broader public.
- Developing a strategy to expand the labour pool by focussing on under-represented groups.
- Analyzing in more depth why young women appear to be turning their backs on careers in engineering.
- Coordinating with other provincial bodies to monitor and improve the capacity of the electricity sector to meet the province's needs for reliable power.
- Coordinating with other provincial bodies to monitor and improve the capacity of the construction sector to meet the province's public infrastructure needs.
- Ensuring that agencies' investments in education and outreach to increase the available workforce are considered prudent expenditures for the purposes of rate hearings before the OEB.
- Developing better information on the retention rates at universities and colleges and the success of apprenticeship programs in Ontario and, together with the results from annual performance reports, addressing specific concerns that these data may reveal.
The Agency Review Panel also commented on certain topics but did not make specific recommendations with respect to them. Pointing out that it would exceed its mandate to make specific recommendations with regard to the duty to consult First Nations and Metis, the Panel noted, however, that a provincial protocol to ensure consistency in carrying out the consultation would be helpful. The Panel also reviewed increases in the agencies' total operating, maintenance and administration expenses since the break-up of Ontario Hydro and concluded that the increases did not have a significant impact on the rates paid by consumers in comparison to the many other factors involved in setting prices at the retail level between 1998 and 2006.
Changes To National Instrument 51-101 Standards Of Disclosure For Oil And Gas Reserves
Changes to National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities have now come into force. For oil and gas issuers that are reporting issuers, these changes will affect your annual securities law filings and the disclosure you make to the public (including on your websites) of certain information.
Annual filings no longer require disclosure of reserves estimated using the constant case or reconciliations of future net revenue. The reconciliation of reserves estimates must be done using gross, not net, reserves. Disclosure of future net revenue on a unit value basis (e.g. $/Mcf or $/bbl using net reserves) is now required.
The requirements that apply to voluntary disclosure of anticipated results from resources have changed. These requirements apply whenever you disclose estimates of resources that are not reserves - for example, in press releases, at investor information seminars or on websites. Before disclosing estimates of resources, reference should be made to the new requirements in NI 51-101 and the classification system for resources set out in the Canadian Oil and Gas Evaluation Handbook.
Also new to NI 51-101 are requirements that apply to voluntary disclosure of "analogous information", which is information you give about an area outside the area in which you have an interest or intend to acquire an interest for the purpose of drawing a comparison or conclusion to an area in which you have an interest. In particular, you must disclose the relevance of the information to your oil and gas activities, the source and date of the information and whether the source was independent. If you are unable to confirm that the analogous information was prepared by a qualified reserves evaluator, or auditor, or in accordance with the Canadian Oil and Gas Evaluation Handbook, a cautionary statement to that effect must be made.
Federal Government Moves Closer Towards Regulating Ghg's And Other Air Pollutants
The Government of Canada has issued a notice in the Canada Gazette requiring certain facilities to submit information concerning greenhouse gas (GHG) emissions and criteria air contaminant (CAC) emissions for 2006, by May 31, 2008. While many facilities already had reporting requirements under the National Pollutant Release Inventory (NPRI) and the GHG Emissions Reporting Program, the new notice requires much more information.
To illustrate, under the GHG Emissions Reporting Program for 2006, all facilities emitting 100,000 tonnes CO2 equivalent had to report the total quantity of emissions. Under the new notice, facilities must report not only the total quantity of emissions of GHGs (and the other listed CACs), but also information concerning economic output (e.g. for aluminum facilities, how much aluminum was produced). This will enable the government to draft its intensity-based targets for GHGs (i.e. tonnes of GHGs emitted per widget produced), using the 2006 data as a baseline. The new notice contains 15 sector-specific schedules, setting out the precise reporting requirements for each sector (e.g. cement, chemicals manufacturing, oil sands, potash).
Some facilities will be captured by both the old requirements and the new ones, and indeed the new notice provides that, where there is overlap, the facility may simply refer to previously submitted information. There may be some facilities that did not have to report under the NPRI or the GHG Emissions Reporting Program that will be captured by the new notice. To reiterate, even facilities that previously reported under the NPRI or GHG Emissions Reporting Program would need to submit further information under the new notice (e.g. in respect of economic output).
The fundamental difference between the old reporting requirement and the new one is evident when one considers the disparate statutory authority from which they are derived. The NPRI and the GHG Emissions Reporting Program are rooted in s. 46 of the Canadian Environmental Protection Act, 1999, which allows the government to gather information "for the purpose of conducting research, creating an inventory of data, formulating objectives and codes of practice, issuing guidelines or assessing or reporting on the state of the environment". By contrast, the new notice is rooted in s. 71, which allows the government to gather information "for the purpose of assessing whether a substance is toxic or is capable of becoming toxic, or for the purpose of assessing whether to control, or the manner in which to control, a substance". In other words, the old reporting requirements were meant to enable the government to create an inventory of emissions, but the new requirements are meant to enable the government to draft regulations, which are expected some time in 2008.
Indiana Utility Regulators Approve Duke Energy Clean Coal Power Plant
The Indiana Utility Regulatory Commission has granted Duke Energy permission to construct a technologically advanced clean coal power plant in Edwardsport, Indiana. This project will be the first commercial-scale coal gasification power plant to be built in the United States in the last 10 years. An average of 800 to 900 construction workers will be employed over a three-year period, with a peak work force of 2,000. Ongoing plant operations would employ approximately 100 people. However, before starting construction early next year, and to achieve its power production goal in early 2012, an air permit must be obtained from the Indiana department of Environmental Management.
The plant is expected to be a 630-megawatt facility using advanced integrated gasification combined cycle (IGCC) technology and will produce nearly four times as much power as the existing plant at Edwardsport, with much less environmental impact, including a 45 percent reduction in carbon dioxide emissions per net-megawatt hour.
IGCC uses a coal gasification system to convert coal into a synthesis gas (syngas), which is then processed to remove sulphur, mercury and ash before being sent to a traditional combined cycle power plant. There is an ongoing study to review the success of IGCC technology in removing carbon dioxide from coal during the syngas conversion process to enable it to be stored or sequestered in underground geologic formations. Should the study be successful, carbon dioxide capture and sequestration equipment could be added to the plant to provide additional reductions in emissions.
Although the plant will cost approximately $2 billion, the
cost will be offset by more than $460 million in local, state
and federal tax incentives. The plant will also result in an
average increase in electricity rates of approximately 16
percent to be phased in from 2008 through to 2012.
NERC: Strategic Plan 2008 - 2013
The North America Electric Reliability Corporation (NERC) recently released its strategic plan for the corporation's activities in 2008 and beyond. The plan is the result of a strategic planning workshop held by the NERC Board of Trustees on August 15, 2007.
The previous NERC strategic plan, with which Gowlings' David McFadden was involved, was completed in June 2003 and was intended to cover the period from 2003 - 2006. It was updated in August 2004 to address specific changes required as a result of the August 14, 2003 blackout in Northeastern North America. The plan had centered on a list of priority goals with high level mission, vision and value statements as the backdrop. The result of this plan was the development of a list of priority goals during the transition period which helped form the basis for several of the present program areas such as standards, compliance, reliability assessment, situation awareness and infrastructure security.
Since the previous plan was developed, several changes have taken place both in the United States and Canada. In Canada, NERC's Reliability Standards have been recognized and play a role in the development and enforcement of standards. However, the enforceability of these Standards varies from province to province. In Ontario, for example, the Standards have been mandatory since May 2002, whereas Quebec only adopted legislation establishing these standards in 2006.
In 2007, NERC revised its internal planning processes to provide for consistency and continuity for its three planning phases: strategic planning; program area work plans; and the annual business plan and budget. With this process, the strategic planning phase will produce a longer term (approximately five-year) plan that provides overall direction for the company and incorporates new industry plans. The goal is for the strategic plan to be revisited on a two-year cycle with work completed and ready for approval during the regularly scheduled fall Board of Trustees meeting. Program area plans will be completed before March of each subsequent year and the final phase of the NERC internal planning process will be the development of the annual business plan and budget.
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