- Gowlings Increases Its Oilsands Bench Strength
- 2008 Federal Budget
- Oilsands Expectations 2008
- Ontario Centres of Excellence Injects $28 Million Into Breakthrough Clean Energy Technologies
- Ontario Reliability Outlook
- Alberta's Initiatives to Tackle Climate Change
- Getting to 2050: Canada's Transition to a Low-Emission Future
Gowlings Increases Its Oilsands Bench Strength
Gowlings is pleased to welcome Arnie Olyan as the newest member of our Energy and Infrastructure Team. Arnie's expertise extends to the project structuring, contract drafting and negotiation side of energy projects, from project design and build, through facility commission and start-up. His particular experience has been in the Oil Sands, whether in the engineering, procurement and construction stages of projects or in the operation and maintenance phases.
Arnie has extensive experience working with large mobile mining equipment that has become the icon of the oil sands industry, assisting clients in the purchase of these massive units or in drafting the mining services agreements that result in their use.
Arnie is the author of "Oilsands Expectations 2008", appearing in this issue of energy@gowlings, which describes the expected "Top 10 Events" of 2008 which will have an impact on Canada's ability to substantially increase its oil production capability.
2008 Federal Budget
The federal government recently tabled its 2008 Budget. The following are the highlights pertaining to the energy sector:
- The government plans to strengthen its ecoACTION plan by:
- Providing $66 million over two years to establish the regulatory framework for industrial air emissions which will impose binding national regulations on greenhouse gas emissions and air pollutants across all major industrial sectors. The greenhouse gas regulations will come into force in 2010 and provide for market-based mechanisms that will establish a price for carbon and support the development of carbon trading in Canada. Key features of this regulatory regime include:
- An electronic tracking system for units traded in the carbon market;
- A single window reporting system for industry;
- An industry-supported technology fund to invest in emissions for reduction projects;
- An offset system to finance emission reduction projects in non-regulated sectors; and
- Better modelling of air quality.
- Providing $250 million for a full-scale commercial demonstration of carbon capture and storage in the coal-fired electricity sector, research on the potential for carbon storage in Nova Scotia and economic and technological issues. Of the $250 million, $240 million is earmarked for the proposed full-scale commercial demonstration of carbon capture and storage in the coal-fired electricity sector in Saskatchewan. Little is known of the geological formations outside the Western Sedimentary Basin that could be used for carbon capture; therefore, Budget 2008 provides $5 million, along with a complementary investment by the province of Nova Scotia, to support geological research for potential carbon capture in Nova Scotia;
- Increasing the capital cost allowance (CCA) rate for carbon dioxide (CO2) pipelines, which is a component of carbon capture and storage systems, from 4% to 8%. The CCA rate for pumping and compression equipment on CO2 pipelines will be set at 15%;
- Expanding eligibility for accelerated CCA to the following applications:
- Ground source heat pump systems used for space heating and hot water;
- Biogas production systems that use animal waste and sewage treatment residue as inputs and those that produce biogas for commercial sale;
- Electrical or thermal generating systems that use purchased biogas; and
- Systems that produce bio-oil, or heat from specified waste sources, where the system output is sold to a third party that uses it for specified purposes.
- Providing $10 million over two years for scientific research and analysis on biofuels emissions to support the development of regulations and demonstration projects to verify that new blended renewable diesel is safe and effective for the Canadian climate and conditions;
- Investing $300 million to support nuclear energy, including the development of the Advanced CANDU Reactor and maintaining the safe, reliable operations of the Chalk River Laboratories;
- Extending GST/HST relief to land leased to situate wind or solar power equipment for the production of electricity. This relief will be applicable to lease payments due on or after February 26, 2008; and
- Providing $21 million over two years to make environmental law enforcement more effective.
The government also plans to strengthen the ability of
Canadian universities to attract and retain the world's
top science leaders by providing $21 million, over two years,
to establish up to 20 Canada Global Excellence Research Chairs.
The new research chairs will be offered in what the government
sees as four priority areas: the environment, natural resources
and energy, health and information and communication
By: Michael Morrison
Oilsands Expectations 2008
Much has been written about the "Alberta Advantage" and the expectation that 3 million barrels of hydrocarbon product (anything from raw bitumen to light synthetic crude oil, but excluding natural gas) will be produced daily from the oilsands by 2015. About one-third of that amount is currently being produced. So what - fairly and reasonably - might be the Top 10 Events expected to occur in 2008 that will provide the major strides toward the achievement of new production levels?
1. Canadian Natural Resources - Horizon Oil Sands Project - Phase 1
By December, 2007 this project (mining - extraction - upgrading) approached 90% completion, with commissioning and start-up and then "first oil" anticipated in Q3 2008. Full production capacity of 110,000 barrels per day will not be achieved before 2009 at the earliest.
2. OPTI/Nexen - Long Lake Phase 1
While suffering some delay and cost overruns in 2007 (which has unfortunately been an all-too-common oilsands phenomenon), this steam-assisted gravity drainage (SAGD) extraction and upgrading project should come on-stream by mid-year. Nexen is currently "steaming" a majority of its wells and OPTI's "Orcrude" gasification, hydrocracker and utilities units are built. Because it is using new technology, achievement of the 60,000 barrels per day capacity will likely take some time. If OPTI is successful in using the "heavy upgrader bottoms" as a fuel source in lieu of natural gas, this project could well set a new paradigm in the industry.
3. Petro-Canada/UTS Energy/Teck Cominco - Fort Hills
Front-end engineering and design of this 190,000 barrel per day initiative is well underway. By late 2008 (Q4), the partners will be far enough along in their planning that a final investment decision (and authorization to spend the necessary billions of dollars) will likely be made.
4. Suncor Energy - Upgrader 2 Expansion
Construction is reaching 80% completion on this 100,000 barrel per day expansion in upgrading capacity. Commissioning and start-up will begin in 2008, while achievement of "name plate" capacity will only occur next year.
5. Imperial Oil/Exxon Mobil - Kearl Lake Phase 1
While this 100,000 barrel per day mining and extraction initiative (no upgrading is currently proposed) has already received regulatory approval, an evaluation of the costs associated with that approval is ongoing. Preliminary engineering continues and a commercial decision as to whether (and if so how) to proceed is expected this year.
6. Total E&P Canada/Enerplus Resources - Deer Creek/Joslyn
While new to the oilsands, Total is providing every indication that oilsands are an integral part of the "Total Strategy". The project is currently "staffing up". The design basis memorandum (DBM) for a 100,000 barrel per day mining and bitumen extraction facility is currently being settled. The hearing for regulatory approval of the project begins in the spring of 2008 and approval is anticipated by year end.
7. EnCana/ConocoPhillips - Foster Creek and Christina Lake Expansions
This 50-50 partnership of heavyweights uses SAGD to bring bitumen to the surface, before the pipelining of bitumen for further processing to one of two ConocoPhillips refineries in the United States. The SAGD capacity expansion (mainly at Foster Creek) has now been completed, resulting in an expected incremental increase in combined production to 60,000 barrels per day from the two sites, once the optimum results of steaming are achieved by late 2008 or early 2009.
8. Petro-Canada-Strathcona (Edmonton) Refinery
Construction has reached approximately the half way point in the conversion of Petro-Canada's refinery so that, instead of crude oil from the Western Canadian Sedimentary Basin, it will be possible to process light, synthetic crude oil (the product of the upgrading of bitumen) into the end-use products on which Canadians depend (gasoline, jet fuel, kerosene, etc). By year end, re-fit (construction) at the Strathcona Refinery should be complete and commissioning and start-up of this 135,000 barrel per day refinery will be underway.
9. Husky Energy - Sunrise Phase 1
By late 2007, Husky was nearing completion of front end engineering and design (FEED) for its "in situ" extraction of what will eventually be 60,000 barrels of bitumen per day. Regulatory approval of what is understood to be the SAGD of the resource has already been received and, upon completion of FEED, an investment decision by Husky is expected.
10. Devon Canada - Jackfish Phase 1
Construction of this 35,000 barrel per day SAGD bitumen extraction facility is essentially complete to the point that steam injection has begun. Warming of the "goo" will take some time, but initial extraction trending toward 35,000 barrels per day will ramp up in 2008.
Optimism is currently running high among oilsands operators.
Given the foregoing, it is easy to understand why.
By: Arnie Olyan
Ontario Centres Of Excellence Injects $28 Million Into Breakthrough Clean Energy Technologies
The Ontario Centres of Excellence Inc. (OCE) announced, along with its industry and academic partners, an investment of $28 million in the research and development of six clean energy projects. OCE will inject $13 million into the six projects with the balance of the funding being provided by the industry and academic partners. The OCE notes that these projects "promise to create cleaner and more efficient ways for Ontarians to generate, consume and manage energy."
The six projects, involving breakthrough technologies in solar, hydrogen and energy conservation and demand management, address issues critical to Ontario's energy sustainability:
- The demand for solar power as a viable, cost effective alternative energy source;
- The need for systems and programs to help people manage their consumption; and
- The ability to access clean energy alternatives.
"OCE is committed to playing a significant role in transforming the energy sector to establish Ontario as a world leader in clean energy through the commercialization of innovative solutions," said David McFadden, Chair OCE of the Board of Directors and Chair of the National Energy and Infrastructure Industry Group at Gowlings.
The Minster of Research and Innovation, the Honourable John Wilkinson, added that, "Today's investment builds on the considerable talent of our world-class researchers to ensure Ontario maintains leadership in growing sectors and consistently turns global challenges, such as climate change and environmental sustainability, into opportunities for Ontario. These projects represent the strong partnerships among our top researchers, global business leaders and government that will provide Ontarians with a cleaner environment, a higher quality of life and more opportunities for success."
Before calling for project proposals, the OCE first engaged a wide range of Ontario's energy sector leaders to clearly identify gaps and market needs. The OCE received more than 100 expressions of interest for project funding reflecting the province's innovative capacity for clean energy solutions. After a rigorous selection process, the following projects were selected for their disruptive characteristics, promise of significant economic benefit to the province, research excellence and potential to transform the marketplace:
- Energy Consumption Management System Gives Consumers Control;
The Energy Hub Management System, developed in partnership with the University of Waterloo, will enable Ontario homeowners and businesses to take ownership of their energy needs, while reducing costs and the impact on the energy grid. A smart web-based tool gives consumers control to change the way they use energy, like programming the system to switch off the central energy grid at peak times, and move to on-site alternatives like solar and wind energy. Led by the University of Waterloo, project participants include Hydro One Networks Inc., Energent Energy Solutions (Waterloo) and Milton Hydro Distribution Inc.
OCE investment: $1 million
Partner Investment: $1.45 million
- Low Cost, High Performance Thin Film Cells Charge Solar Industry;
Despite its undeniable potential to help meet ever-increasing energy demands, widespread use of solar energy is limited due to high costs and low efficiency. The Solar Venture, a new Ontario company, will create a flexible hybrid-organic thin film material for use in solar panels that will radically reduce the full costs associated with solar generation and ensure high-performance. Fully recyclable, this new technology is expected to make solar power a competitive alternative resource. Led by The Solar Venture (Toronto), projects participants include the University of Toronto, The University of Montréal and Solaris-Chem (Montréal).
OCE Investment: $1.5 million
Partner Investment: $1.53 million
- High-Capacity Fuel Cell Helps Meet Commercial Demand for Power;
Acumentrics is launching a pilot installation at the University of Toronto to demonstrate an innovative fuel cell system that provides low-cost, efficient, environmentally-friendly power and heating all in one package. The project aims to develop a commercial system to demonstrate high temperature solid oxide fuel cell technology as a viable, commercial alternative for utilities struggling to meet ever-increasing demand for power, by lowering power costs, reducing greenhouse gas emissions, enhancing redundancy and reducing power failures. Designed to operate on conventional fuels like natural gas and propane, it will run off the existing distribution infrastructure but is also capable of operating on carbon-neutral fuels such as hydrogen, when widely available. Led by Acumentrics Canada (Kingston), project partners include The University of Toronto, Queen's University, the University of Waterloo and Direct Energy Canada Inc. (Toronto).
OCE Investment: $2.5 million
Partner Investment: $3.25 million
- Next-Generation Solar Material to Boost Solar Production;
McMaster University and ARISE Technologies introduce a novel way to manufacture solar cells, using a proprietary silicon technology. The new material aims to be more than twice as efficient as existing solar cells and, manufactured at greatly reduced costs, making the solution suitable for use in large solar panels. This new technology has the potential to propel Ontario to the forefront of the global solar industry, reduce reliance on market incentives and make solar panels a more feasible option for Ontario homeowners and businesses. Led by McMaster Univeristy, the project partner is ARISE Technologies (Waterloo)
OCE Investment: $2 million
Partner Investment: $2.1 million
- Decreasing Diesel Dependence in Remote Northern Communities; and
In an effort to reduce diesel dependency in remote Northern Ontario communities, this partnership aims to develop a low-carbon community energy system that combines wind turbines specifically designed for extreme northern climates, with a storage system that uses hydrogen and a fuel cell to generate electricity. This off-grid hybrid power system provides a lower-cost, environmentally friendly solution to alleviate the significant financial burden of diesel power systems on remote communities. A key element of the project focuses on developing best practice methods for community engagement with respect to mapping energy needs with the alternative resources available, resulting in customized conservation programming. Led by the University of Waterloo, project partners include Hydro One Remote Communities Inc. and the Nishnawbe Aski Development Fund (Thunder Bay).
OCE Investment: $3 million
Partner Investment: $3.4 million
- Connecting Solar Farms to the Grid.
The University of Western Ontario and the University of Waterloo are developing comprehensive solutions to help grid operators incorporate large-scale solar farms on to their networks. By developing technologies to efficiently convert solar energy to electricity, and produce innovative software for making weather-based predictions to help manage unique weather challenges, the creation of a robust solar power integration plan has the potential to encourage utilities in Ontario and around the world to adopt solar technologies. Co-led by the University of Western Ontario and the University of Waterloo, project partners include Hydro One Networks Inc., OptiSolar Farms Canada (Sarnia), Bluewater Power Distribution Corporation and London hydro.
OCE Investment: $3 million
Partner Investment: $3 million
By: Michael Morrison
Ontario Reliability Outlook
Ontario's Independent Electricity System Operator (IESO) has released its Reliability Outlook. The Outlook states that Ontario's longer-term reliability picture is positive. Ontario's focus should be ensuring that generation, transmission and demand-side initiatives are implemented in time to meet needs as well as address any integration and operational challenges in the future.
Since the last report, there have been delays to the scheduled in-service dates for Phase One of the Goreway Generating Station in the Greater Toronto Area (GTA) and unplanned outages at the Pickering Nuclear Station which resulted in more than 1,500 MW of supply being unavailable. Aside from this outage, there was no major disruption in service.
Almost 4,000 MW of new gas-fired supply is expected to come into service over the next three years. This new supply is sourced from the Greenfield Energy Centre near Sarnia, the Portlands Energy Centre in Toronto, the Sithe Goreway facility in Brampton and the Halton Hills Generating Station near Milton. In addition, approximately 630 MW of grid-connected wind power is also expected to come into service before the end of 2008.
With 475 MW of wind resources currently being installed, it is expected that this type of generation will take on an increasingly significant presence in Ontario's future supply mix. Challenges could arise from the intermittent nature of wind and demand peaks. The IESO's Wind Integration Standing Committee has developed recommendations and implemented decisions to reduce barriers to the successful integration of wind generation into the system.
Operability of the Power System
Previously, the IESO had identified operability as a key parameter for future supply mix. Since then, the OPA has submitted the Integrated Power Supply Plan (IPSP) to the Ontario Energy Board (OEB) for approval. The IESO has also discussed operability matters with the Ontario Power Authority (OPA) through the preparation of the IPSP and will follow up with an operability review, simulating future operating conditions under the proposed supply portfolio to assess whether there is enough operating flexibility. The findings will be released shortly.
Timely implementation of proposed transmission facilities still remains a key component for addressing future reliability needs. Over the next decade, enhancements will be implemented in Southwestern Ontario, Northern Ontario, the Greater Toronto Area, York Region, South-Central Ontario, and many other places. The development of new transmission across Southwestern Ontario still remains a high priority. It is expected that new facilities from Bruce to Milton will deliver the full capability of the Bruce refurbishment and the regions expected new wind resources. Transmission enhancements are also required to enable the replacement of the coal-fired stations with cleaner resources.
Conservation and Demand Management
The Ontario government has set aggressive load reduction targets for the near future, with a target of 2,700 MW reduction in peak demand by 2010. It is expected that Ontario's Smart Metering Initiative can also help enhance the reliability of the power system. This initiative calls for smart meters to be installed in homes and small businesses throughout the province by 2010.
The IPSP filing with the OEB has represented a major milestone in Ontario's supply program. However, the IESO remains concerned about the uncertainty surrounding the length of the approvals process. Substantial work is currently underway by a number of stakeholders to address the inefficiencies in the process. The improvements should ensure appropriate public review of energy and other infrastructure proposals.
For information, please refer to:
By: Nicole Chen
Alberta's Initiatives To Tackle Climate Change
The Alberta Government released its new Climate Change Strategy 2008 on January 24, 2008. The Strategy envisages that Alberta will reduce its greenhouse gas emissions by 50% below "business as usual" levels and 14% below 2005 levels by 2050. The 50% target would amount to a 200-megatonne reduction.
The Strategy consists of three elements:
- carbon capture and storage initiatives;
- an increase in investment in clean energy technology; and
- increases in conservation and energy efficiency initiatives.
Carbon Capture and Storage. The Alberta Government will form a government-industry council to establish specific ways to significantly reduce greenhouse gas emissions by capturing air emissions from industrial sources and locking them permanently underground in deep rock formations. The council will respond to a federal-provincial task force report on carbon capture and storage and will develop a made-in-Alberta strategy for creating and adopting new technology. The Strategy notes that Alberta has the capacity to be a world leader in this developing area. Carbon capture technologies are intended to account for 70% of the planned 200-megatonne reduction.
Clean Energy Technology. The second element of the Government's Strategy is an increased investment in clean energy technologies and increases in the use of renewable and alternative energy sources such as bioenergy, solar power, wind power, hydrogen and geothermal energy. Alberta anticipates that 18% of its planned reductions will be accounted for through the use and implementation of these forms of clean energy technologies.
Conservation And Energy Efficiency. The final aspect of the Strategy states that 12% of Alberta's proposed emissions reductions are to come from conservation and energy efficiency. The Government will create consumer incentives which will be set out in a detailed plan to be released in the Spring.
The Strategy was announced on the heels of an unfavourable report card issued by the Pembina Institute and the World Wildlife Fund Canada, which criticized the environmental record of various oilsands operators. Their report, entitled Undermining the Environment: The Oilsands Report Card, stated that, while emissions intensity has decreased, the actual amount of emissions is on the rise as a result of increases in overall energy production. Critics of Alberta's new climate change Strategy argue that Alberta's initiative is not aggressive enough and that it does not target overall reductions. However, industry players are commending the Alberta Government for taking a step in the right direction.
Industry groups have consistently expressed the view that it is imperative that the Alberta Government balance industry's ability to remain competitive with whatever plan it implements to address climate change. Industry has stated that it is willing to work with the Government in developing new technologies to address the issues of climate change in the Province.
The Alberta Strategy also shortly followed the release of a
report from a body known as the ecoENERGY Carbon Capture and
Storage Task Force, entitled Canada's Fossil Energy
Future, on January 9, 2008. The report of this joint
industry-government Task Force was addressed to the Alberta
Minister of Energy and the federal Minister of Natural
Resources and set out a number of recommendations as to what
steps should be taken to begin implementing and testing new
carbon capture and sequestration technology while balancing the
financial and regulatory risks involved.
By: Lisa Jamieson
You can access Alberta's new climate change plan
To read the government of Alberta's report entitled
Alberta's Climate Change: Facts About Climate
Change go to:
To read the ecoENERGY Carbon Capture and Storage Task Force
report entitled Canada's Fossil Energy Future,
To access the report card issued by the Pembina Institute
and the World Wildlife Fund Canada entitled Undermining the
Environment: The Oilsands Report Card, go to:
For further information please contact:
By: Lisa Jamieson, David Brett, James Smellie, Ron Hansford and Heather Tanaka
Getting To 2050: Canada's Transition To A Low-Emission Future
In the fall of 2006, the Canadian Government asked the National Round Table on the Environment and the Economy (NRTEE) to look at issues concerning national long-term climate change and air pollution policies. NRTEE was asked to provide advice on how Canada's greenhouse gas (GHG) and air pollutant emissions could be reduced significantly by 2050.
The NRTEE based its research on the federal government's Turning the Corner policy. In the policy, the targets for GHG were 20% below 2006 levels by 2020 and 60% to 70% below 2006 levels by 2050. The NRTEE research concluded that, with some key enabling conditions and acknowledgement of certain uncertainties and risk, the transition would be manageable. In reaching that conclusion, NRTEE had three core assumptions:
1. The overall objective of Canada's climate change policy should be to contribute to the global goal of climate stabilization;
2. Canada's medium- and long-term emission reduction targets have been defined; and
3. Canada has national environmental and economic circumstances that need to be taken into account when designing climate change and clean air policies.
Enabling Conditions for Managing the Transition
The NRTEE concluded that there need to be five enabling conditions that should be reflected in Canada's climate change policy framework in order to manage the transition to a low-emission future. They are:
- A need to ensure Canada will work in concert with the rest of the world and that any adverse economic consequences of policy action are minimized;
- A need for policy certainty beyond the short term, to create long-term predictability for new investment in innovation and technology;
- An economy-wide emission price signal, complemented with regulatory policies, as the core element of a policy framework;
- Wide deployment of low-emission technologies and specific technology policies; and
- An integrated approach to climate change and air pollution.
Recommendations for GHG Emissions
1. Implement a strong, clear and consistent GHG emission price signal across the entire Canadian economy as soon as possible to avoid higher emission prices;
2. Institute a market-based policy that is similar to an emission tax or a cap-and-trade system or a combination of both;
3. Develop complementary regulatory policies in conjunction with the emission price signal, which would support research, development and demonstration of technologies, as well as strategic investment in infrastructure;
4. Establish a Canada-wide plan as soon as possible to better coordinate all complementary federal, provincial and territorial GHG emission reduction policies; and
5. Apply GHG emission reduction policies that incorporate adaptive management practices and have built-in monitoring and assessment mechanisms to allow for regular review to ensure efficiency and effectiveness.
The NRTEE concluded that, to better understand risk minimization associated with transitioning to a low emission society, additional policy research must be conducted. These issues include:
- Further analysis of data gaps and modelling;
- Policy design issues on proposed market-based instruments;
- A "bottom-up" analysis of sectoral and regional implications of policy design;
- Governance issues related to all levels of coordination of climate change policies; and
- Consideration of potential benefits of addressing climate change.
For more information, please refer to:
By: Nicole Chen
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