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In this issue
ONTARIO'S IESO RELEASES 10-YEAR MARKET OUTLOOK
By Michael Morrison
Ontario's Independent Electricity System Operator (IESO) has released its 10-Year Market Outlook: An Assessment of the Adequacy of Generation and Transmission Facilities to Meet Future Electricity Needs in Ontario (Outlook). The Ontario Power Authority (OPA) now has the responsibility for producing long-term electricity supply and demand forecasts; however the IESO agreed to prepare the 2005 10-Year Market Outlook “while the OPA determines how to best address its forecasting responsibilities.”
Since the IESO issued the last 10-year Market Outlook in 2004, 650 MW of gas-fired generation has been introduced into Ontario, the government decided to restart Pickering Unit 1 bringing on 515 MW in September 2005 and announced 2,200 MW of new supply initiatives and 395 MW of renewable energy supply under recent request for proposals. The government also confirmed its commitment to phasing out coal fired generation by the end of 2009 (for more information on the governments coal phase-out plan, refer to the July 4, 2005 issue of Energy @ Gowlings ).
In addition to the above, there are projects in various stages of “discussion, development or negotiation.” These projects represent more than 9,000 MW of generation and include:
- The return to service of the Bruce Generation Station Units 1 and 2;
- Increasing the energy capability of the Beck 2 Generating Station by constructing a third tunnel;
- The development of additional hydro-electric generation capacity in Northern Ontario;
- Recently announced plans for additional generation in downtown Toronto and the western Greater Toronto Area, co-generation across the province and demand-side measures;
- The return to service of Pickering Generating Station Units 2 and 3;
- The development of conservation programs under the OPA;
- The development of additional renewable generation to meet the Renewable Portfolio Standard of 2,700 MW by 2010; and
- Long-term power purchases from Manitoba and Newfoundland and Labrador.
The IESO notes that, “timely decisions on these projects will be key to addressing the projected shortfall which would occur if coal were shut down and not replaced. Continuing progress toward establishing and meeting in-service dates is critical.” The following chart outlines Ontario's supply model under the Coal Replacement Scenario.
Source: Ontario IESO
It can be seen that under a low required resource scenario, the balance between resources and supply does not become critical until 2013 while under the high required resource scenario, the balance between resources and supply becomes critical as early as 2007.
The Outlook notes that the conservation target that has been set by the government is aggressive. Without the announced conservation measures, energy consumption is forecast to grow about 0.9% on an annual basis from about 157 TWh in 2006 to about 170 TWh in 2015.
Normal weather peak demand is expected to increase to about 26,900 MW in the summer of 2015, which is about a 2,700 MW increase over the current normal weather peak demand of about 24,200 MW.
The IESO has committed to monitor and assess the shutdown of the coal fired plants and their replacement, providing “advice to all parties regarding the actions or adjustments required to ensure reliability is maintained.” The Outlook also notes that new generation facilities often encounter operating issues which adversely affects their reliability for a period of time after coming into service. Since this issue can have a significant impact, the IESO notes that, “a critical requirement of the coal replacement plan is that while coal plants can be scheduled to stop running, those units will be held available for a period of time to operate if necessary to maintain reliability.”
The Outlook also notes that new generation and transmission facilities supplying downtown Toronto are “urgently” required over the next five years to meet the area's growing demand. “There is an increasingly high risk of transmission facilities supplying downtown Toronto becoming overloaded during heavy demand periods and a combination of new generation capacity, demand-side initiatives and transmission are needed to alleviate this concern. The present transmission facilities are already operated at or near their capacity during hot summer days when electricity demand is high due to the heavy use of air conditioning. As electricity demands continue to grow faster than new transmission can be built, it is vitally important for generation to be located in the downtown area within the next two to three years in order to reduce power flows through heavily loaded transmission facilities to acceptable levels.”
The full text of the Outlook can be viewed by visiting the following site:
http://www.ieso.ca/imoweb/pubs/marketReports/10YearOutlook_2005jul.pdf
michael.morrison@gowlings.com (416) 369-6169
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ALBERTA'S ELECTRICITY SYSTEM OPERATOR RELEASES 20-YEAR TRANSMISSION SYSTEM OUTLOOK
By Michael Morrison
Alberta's Electricity System Operator (AESO) has released its 20-Year Transmission System Outlook (Outlook). The Outlook focuses on 500kV and 240 kV lines only and is intended to provide the foundation for transmission system development.
The Outlook notes that the AESO is “directed by policy and regulation to take a proactive approach to transmission system development to ensure that generation and loads have access to constraint free transmission capacity in order to facilitate an openly competitive and efficient electricity market while maintaining system reliability.” Specifically, the Outlook's objectives are to:
- Set the context for more specific 10-year transmission plans and individual transmission project need applications;
- Set the stage for shorter-term actions to be taken to facilitate provision of transmission in the longer term, e.g. acquisition of right-of-way for major transmission developments;
- Facilitate generation development;
- Meet future load growth requirements reliably;
- Identify potential alternative transmission system developments to account for the uncertainty surrounding generation development; and
- Facilitate merchant or independent transmission developments to neighbouring jurisdictions.
From 1999 to 2003 the load on the system has increased on average by 3.9 per cent per year. Based upon the AESO economic forecast, the peak demand will increase on average, over the next 20 years, by 2.8 per cent per year. This equates to a total peak demand of 15,617 MW in 2040; an increase of 6,650 MW from the 2003 level of 8,967 MW.
The Outlook uses six scenarios to facilitate planning. As a result, the AESO forecasts that between 6,150 MW and 13,400 MW of new generation will be required to meet the province's needs over the next 20 years. The Outlook notes that “there are a number of possible technological choices that can be considered to meet the need and long-term system development requirements of Alberta's transmission system. The system can be reinforced using transmission lines designed for AC operation with voltages ranging from 240 kV to 765 kV. An alternative to the AC option is the High Voltage Direct Current (HVDC) option with transmission lines designed for operation at voltages ranging from 250kV to 500 kV.”
The following expansion projects are common to each of the six planning scenarios:
- 500 kV reinforcement from the Fort McMurray area;
- Further reinforcement of the Edmonton-Calgary transmission system, in the form of a second 500 kV line from the Edmonton area to the Calgary area; and
- Additional 240 kV development in several areas of Alberta including:
- The Grande Prairie area;
- The East Edmonton - Fort Saskatchewan area;
- The Lloydminster area;
- The Calgary area;
- The Lethbridge - Medicine Hat - Empress area; and
- The Pincher Creek area.
The Outlook notes that obtaining transmission line right-of-way is becoming increasing difficult. The AESO will continue to monitor this situation and will “file the necessary need applications to secure the transmission right-of-way in anticipation of the actual transmission line development.”
The AESO is directed by government policy to “evaluate provision of additional intertie capacity with neighbouring jurisdictions as a means to stimulating generation development in Alberta.” As such, the AESO will also be concentrating on intertie alternatives as a means to ensuring overall system reliability. The AESO will continue to work with transmission service providers, including merchant or independent transmission proponents, in other jurisdictions and will participate in regional transmission planning studies.
This is the first 20-year Outlook that has been released by the AESO. The AESO will continue to work on the following:
- Update and issue the next 10-Year Transmission System Plan;
- Continue further detailed analysis, including stakeholder consultation, on the projects outlined above with a view to filing need applications with the EUB;
- Continuing coordination efforts with neighbouring jurisdictions regarding interconnections, and
- Initiate further work to implement the recommendations included in the Electricity Policy Framework.
The full text of the Outlook can be viewed by visiting the following site:
http://www.aeso.ca/files/AESO_20-YearOutlookDocument_2005_Final.pdf
michael.morrison@gowlings.com (416) 369-6169
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SCHEDULING ROLLER COASTER WITH MACKENZIE VALLEY GAS PIPELINE HEARING
By Alan Hollingworth
Casual readers can be excused if they are in a state of confusion as to whether or not the Mackenzie Valley Pipeline (MVP) hearings are on schedule or even going to take place. The main project proponent, Imperial Oil Resources Ventures (IOR), suspended most of the work on the project, citing delays and unreasonable demands. However, there have been several recent developments which appear to be clearing the way to renewed progress.
Recently, a court proceeding which had threatened the project, initiated by the Deh Cho First Nation in the southern NWT, was resolved by, among other things, promises of greater consultation and payment of significant sums of money by the Government of Canada.
On July 19th, the federal government announced it would spend $500 million over 10 years to deal with social and economic issues arising from or connected with the MVP.
The Joint Review Panel (JRP) proceeding, which is examining the environmental and socio-economic effects of a pipeline, has been delayed. On July 18th, the JRP announced that it will proceed with its hearing. However, it is looking for more information, which it hopes will be supplied by September 30th. Thereafter, it will be 45 days before a JRP hearing takes place.
On the other hand, the National Energy Board (NEB) process itself, which has been proceeding with a minimum of delays, now appears headed for a postponement. The NEB wrote to IOR on July 7th stating its readiness to proceed and inquiring whether the Applicants were similarly prepared. IOR, on behalf of itself and the Applicants, responded on July 13th saying they were not ready and stating that there were “…a number of outstanding issues that need to be resolved…” before moving forward to a hearing.
IOR expects to advise the NEB in late August or early September when it will be ready to proceed. After that, the NEB will need approximately two months to make the necessary arrangements for the hearing.
The Mackenzie Valley Pipeline Project is thought by some to be sensitive to delay since liquefied natural gas import projects continue to be approved and a gas pipeline from the Alaskan North Slope continues to gain momentum. Either type of project could kill or significantly modify the Mackenzie Gas Pipeline Project as currently proposed.
alan.hollingworth@gowlings.com (403) 298-1824
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QUÉBEC ISSUES RFP FOR 2,000 MW OF WIND GENERATION
By David Kierans
On June 29, 2005 the Government and Hydro-Québec jointly announced that Hydro-Québec would issue a request for proposals for 2,000 MW of wind generated electricity. With this additional 2,000 MW, Hydro-Québec will have 3,500 MW wind generated electricity by 2013. This represents 7% of the actual installed global capacity.
The Premier, the Honourable Jean Charest, said that this project will result in an investment of $3 billion and create 3,000 temporary jobs during construction and 800 permanent manufacturing and maintenance jobs.
david.kierans@gowlings.com (514) 392-9551
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MERCURY STANDARDS FOR COAL-FIRED POWER PLANTS
By Katherine van Rensburg
At its meeting on June 27, 2005, the Canadian Council of Ministers of the Environment (CCME), comprising federal, provincial and territorial environment ministers, accepted in principle a draft Canada-Wide Standard (CWS) for Mercury Emissions from the Coal-fired Electric Power Generation Sector. The draft CWS consists of two sets of targets – existing facilities will be subject to annual provincial caps, with the 2010 caps representing a 65% national capture of mercury from coal burned, or 70% including recognition for early action; and prescribed capture rates or emission rates for new plants, based on best available control technology, effective immediately. The draft CWS is intended to reduce mercury emissions from coal-fired plants by 58% from 2003-04 levels by 2010. It is expected that the CCME will give final endorsement of the CWS at their meeting this fall.
The draft CWS can be viewed at:
www.ccme.ca/assets/pdf/canada_wide_standards_hgepg.pdf
katherine.vanrensburg@gowlings.com (416) 369-7226
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GOVERNMENT OF CANADA PROVIDES FUNDING FOR FIVE ETHANOL PLANTS
By Peter Murphy
The Government of Canada has announced a total of $45.7 million in funding for five ethanol plants. This is the second round of funding under Canada's Ethanol Expansion Program (EEP) and is to be used for ethanol plant construction or expansion.
The following companies have been allocated the funds:
- Commercial Alcohols Inc. – $15 million for a new plant in Windsor, Ontario;
- Husky Oil Marketing Company – $10.4 million to build a new plant in Minnedosa, Manitoba;
- Integrated Grain Processors Co-operative Inc. – $11.9 million for a new plant in Brantford, Ontario;
- Permolex Ltd. – $1.1 million to expand its existing facility in Red Deer Alberta; and
- Power Stream Energy Services Inc. – $7.3 million to convert a recently closed starch plant in Collingwood, Ontario.
In making the announcement, Agriculture and Agri-Food Minister, the Honourable Andy Mitchell said that “the interest in this program is a sign of the ethanol industry's growth and potential in Canada.”
The announcement indicated that total Canadian fuel ethanol production is expected to reach about 1.4 billion litres by the end of 2007, which is about seven times what it was prior to the launch of the EEP. The government's announcement noted that at this rate of growth Canada will meet its climate change target for ethanol production two years ahead of schedule. The government target will be met if at least 35 per cent of all gasoline in Canada contains ten per cent ethanol by 2010. The government's announcement noted that any gasoline-powered vehicle manufactured after the 1980s can use gasoline with up to ten per cent ethanol.
Use of ethanol in gasoline helps reduce the amount of green house gases emitted from vehicles by increasing the percentage of oxygen in gasoline, resulting in a more complete combustion with reduced carbon monoxide emissions.
Increased use of ethanol is also expected to create new demand for Canadian farm products.
“The projects that were announced today will put Canada among the world leaders in ethanol production” said the Minister of Natural Resources, the Honourable John Efford. “The rapid growth of this industry and the success of the EEP show how we can work together to create a better environment and new economic opportunities for Canadians.”
For more information on renewable fuels and the Ethanol Expansion Program, please visit:
www.vehiclefuels.gc.ca
peter.murphy@gowlings.com (416) 369-4674
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CANWEA RELEASES MARKET RESEARCH BRIEFING DOCUMENT
By Robert Carillo
The Canadian Wind Energy Association (CANWEA) has released a market research briefing document regarding public opinion about wind energy in Canada. CANWEA notes that this document will “support the development of a comprehensive public outreach and education plan.” The research was conducted by a professional public opinion research company.
The following are highlights of the research:
- The most important electricity related issues to Canadians are:
- Environmentally friendly generation;
- A safe and secure electricity system; and
- Reducing health risks and impacts.
- In general, Canadians are knowledgeable about the sources used to generate electricity in Canada;
- 84% of Canadians care about which source is used to generate electricity in Canada; 41% of Canadians care a great deal;
- 46% of Canadians feel that Canadian companies should be investing in wind energy for the future. The other investment rankings were as follows: hydro (31%), solar (17%), nuclear (9%) and natural gas (4%);
- 51% of the respondents feel that wind energy is currently an important factor in addressing Canada's energy needs and will continue to be in 10 years;
- 54% of the respondents strongly support the development of a wind energy project in their community; and
- 22% of the respondents are very interested in investing in a wind project for their community.
The full briefing document can be viewed by visiting the following site:
http://www.canwea.com/downloads/en/PDFS/
robert.carillo@gowlings.com (416) 369-7111
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ONTARIO POWER AUTHORITY CALLS FOR WRITTEN SUBMISSIONS REGARDING SUPPLY MIX
By Michael Morrison
Ontario's Minister of Energy may, under the Electricity Act, issue directives to the Ontario Power Authority (OPA) with respect to the OPA's overall long-term planning goals. Before issuing such directives the Minister has asked for advice from the OPA on the future supply mix for Ontario's electricity sector.
The OPA is required to provide this advice to the Minister by December 1, 2005 with "the expectation that the advice will be based on the OPA's internal resources, the government's plan to replace coal-fired generation, expert advice solicited from Ontario and abroad, and stakeholder input." The Minister has requested that the supply mix specifically includes:
- Recommendations with respect to conservation targets for Ontario for 2015, 2020 and 2025, taking into account the target already set by the government for 2007;
- Recommendations with respect to additions of new renewable energy capacity by 2015, 2020 and 2025 taking into account the targets already set by the Government of Ontario for 2007 and 2010, and
- Recommendations with respect to the appropriate mix of electricity supply sources to satisfy the remaining expected demand in Ontario, after conservation and renewable sources have been taken into account, and with particular attention to baseload, intermediate and peak availability of energy supply.
The OPA has identified four issues where advice from interested parties would be helpful. These issues include:
- Appropriate analytical planning approaches that focus on assessment of risks, environmental attributes and cost characteristics of various portfolios. The approaches will be of the greatest value where they include assessments of the risks that could affect portfolio performance, including financial, market, environmental and other quantifiable and qualitative risks;
- Appropriate approaches to constructing Conservation and Demand Management (CDM) portfolios for inclusion in long-term plans. These approaches will be of the greatest value where they include established data on technical and achievable potential, costs, implementation barriers, sector specific characteristics, experience in implementation of CDM and technology developments;
- Assessments of different supply technologies and resources in the Ontario setting, including, but not limited to, natural gas generation, coal gasification, nuclear (new and refurbished), wind, bio mass and hydro-electric resources. The assessments will be of the greatest value where they:
- Use recent source information or current data on capital and operating costs, performance characteristics, technology life cycle, environmental impacts and any other relevant characteristics, and
- Present data on a consistent basis across the supply technologies and resources that would be suitable for planning studies.
- Appropriate methods to assess the impact on the natural environment of supply options. The methods will be of the greatest value where they are:
- Methodologically suited to long-term planning;
- Provide for identification and quantification of relevant environmental factors for assessment;
- Capture the cumulative environmental impacts; and
- Provide indications of the sustainability of options and supply mix plans.
The OPA is inviting written submissions from all interested parties on the issues noted above. Submissions are due to the OPA by August 26, 2005.
michael.morrison@gowlings.com (416) 369-6169
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REGULATIONS AMENDING THE NUCLEAR SECURITY REGULATIONS
By Katherine van Rensburg
Amendments have been proposed to the Nuclear Security Regulations and were posted in the Canada Gazette, Part I on June 4, 2005 for comment until August 3, 2005. The proposed amendments are a direct result of the terrorist events of September 11, 2001 and follow a period of consultation after proposed amendments to the regulations were first published in October 2003. The proposed amendments incorporate the requirements of two Canadian Nuclear Safety Commission (CNSC) orders issued immediately following the September 11th events, which required the implementation of specific measures at both high risk and lower risk profile facilities.
The proposed amendments would allow for the 2001 CNSC orders currently in place to be set aside by incorporating their enhanced security requirements into the regulation and bring the CNSC security requirements in line with international security practices. They would also ensure the Canadian public that there is an appropriate level of transparency while respecting the need for security, that enhanced physical protection measures at Canadian nuclear facilities are in place and that the protection of the Canadian public is a vital concern to the government of Canada, the CNSC and the operators of the facilities. See: Canada Gazette part 1, vol. 139, no. 23, June 4, 2005.
katherine.vanrensburg@gowlings.com (416) 369-7226
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GALT #3 COULD BE QUÉBEC'S FIRST COMMERCIAL OIL WELL
By Malinda Gelinas
Twenty kilometres west of Gaspé is the site of what may be Québec's first commercial oil well. Galt #3 well has required substantial amounts of stimulation work, but reports from Junex Inc. and its partner Gestion Berard Lemaire appear favourable. “All the preliminary data collected at this time seems to confirm the validity of our geological concept, notably the presence of HTD in this well.”
Between June 24 and June 27, a total of 434 bbls of fluids were injected into the formation to stimulate production. These fluids were recouped, in addition to 232 bbls of excellent quality crude oil (48 API) and associated gases that have yet to be measured. Also encouraging are signs that, after the cleaning of the formation had been completed, the well continued to generate hydrocarbons without any further external assistance.
This is the first time such a massive stimulation has been undertaken on a well within Gaspésie, and it appears the results show support for improved oil productivity in the formation. “The results are very promising, and they allow us to believe in a commercial oil production at the same time that they demonstrate [sic] the fact that the Gaspesian oil system is working,” said Jean-Yves Lavoie, President of Junex.
As the only natural brine and natural gas producer in Québec, Junex has a unique position in the natural resources sector of the province. Parallel to these production activities in the Bécancour and Gaspé areas, Junex continues its efforts to develop a natural gas underground storage facility beneath the Bécancour industrial park. With exploration permits for more than 4 million acres, of which 3 million are in the Gaspesian Peninsula, Junex is also the leading oil and gas producer and explorer in Québec.
As for the Galt #3 well, Junex will proceed with the installation of a bottom-hole pump equipped with a pressure gauge in order to perform a prolonged production test. The results of this test should be known within the upcoming weeks and will allow the company to determine the production capacity of the well.
malinda.gelinas@gowlings.com (403) 298-1807
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Up Close With … Trish Steele
In this instalment of Up Close With… we feature Trish Steele from Gowlings Calgary office.
 Patricia Steele is a lawyer in the Business Law Department. Her area of practice is energy and natural resources and she dedicates a significant amount of time to policy, ownership and joint venture matters related to coalbed methane development. Trish is the assistant chair of the Canadian Association of Petroleum Producers Natural Gas from Coal Task Group. In addition to providing them with ongoing legal advice, she acted as draftsperson for the Position Paper prepared by the Task Group in 2003, which dealt primarily with laws, regulations and policies of the Alberta Energy and Utilities Board and the Alberta Department of Energy related to CBM development.
Trish is a member of the Organizing Committee for the Canadian Petroleum Law Foundation 43rd Annual Research Conference in Oil and Gas (2004) and presented a paper at the 42nd Annual Research Conference in Oil and Gas (2003) entitled “Coalbed Methane - Conventional Rules for an Unconventional Resource.” Trish presented a paper in Vancouver in April, 2003, entitled “Regulating Coalbed Methane Development in Alberta and British Columbia - A Comparative Analysis of Two Moving Targets” and made a joint presentation with John Ballem in February, 2003, entitled “Coalbed Methane and the Freehold Oil and Gas Lease.” She has also co-authored many papers on various topics related to the oil and gas industry including rights of first refusal, seismic, bankers as constructive trustees and financing oil sands and co-generation projects.
Trish acts for private and public corporations in the areas of CBM and conventional oil and gas development, including corporate restructurings, acquisitions and divestitures, drafting and negotiating agreements, and providing opinions on various types of agreements and leases.
patricia.steele@gowlings.com (403) 298-1908
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