Member Article

On February 27 British Columbia issued “The BC Energy Plan: A Vision for Clean Energy Leadership” (Energy Plan 2007). The document is an extensive statement of provincial energy policy, and a roadmap for future government action in BC’s energy sector. It is the second such sweeping expression of provincial energy policy in the last 5 years, the first provincial energy plan having been issued in November, 2002 (Energy Plan 2002, and indeed is said to "build on the strong successes" of its predecessor.

Energy Plan 2007 focuses sharply, but not exclusively, on environmental issues, and in particular green-house gas (GHG) emission issues. It indicates that the provincial government has accepted at the highest level that global warming is occurring; that it is occurring because of GHG emissions; and that the province ought to take steps to reduce GHG emissions in British Columbia. Where it is perhaps somewhat ambiguous is whether such steps as outlined in the plan will have a net economic cost or benefit.

Energy Plan 2007 is also noteworthy in its detailed and in some cases prescriptive “policy actions” the government intends to take in both the electricity and oil and gas sectors. A total of 55 such policy actions are listed in Appendix A to the plan, and attached to this Bulletin. The following paragraphs provide a brief summary of the more significant ones. Because a significant number of the “policy actions” provide relatively little detail, it is clear that government is still in the process of developing them. This suggests that there may yet be room for input from interested parties, and that Energy Plan 2007 will be something of a “moving target” in the near future. The entire Energy Plan 2007 is available on the government of British Columbia’s website at http://www.energyplan.gov.bc.ca.

Policy Action Items – Oil and Gas Sector
Eliminate All Oil and Gas Well Flaring
Energy Plan 2007 states that all routine flaring at producing oil and gas wells is to be eliminated by 2016, with an interim goal of reducing such flaring in half by 2011. Additional policies designed to reduce flaring will be adopted at test sites and pipelines and steps will be taken to encourage compressor station efficiency to cut back emissions.

Coalbed Methane
One of the key environmental issues arising from the production of coal bed methane is the disposal of the very significant quantities of water that are used to produce gas from coal deposits. Energy Plan 2007 states that government will act to ensure that such waste water may not be surface discharged and must be re-injected below any domestic water aquifers. In addition, coal bed methane developers must demonstrate their previous experience with coal bed gas development and information must be made publicly available as to how the company plans to meet and be accountable for these best practices.

Renewable Fuel Standards
Under Energy Plan 2007 government plans to implement a 5% average renewable fuel standard for diesel fuel, and support the federal government’s plans to increase the ethanol content of gasoline to 5% by 2010.

Nechako Basin
Under Energy Plan 2007 government will encourage development of unconventional gas resources in BC with a particular focus on the Nechako Basin. To encourage development in the Nechako Basin, the government will undertake to actively engage communities in the development and implementation of a comprehensive pre-tenure engagement initiative for First Nations in the region. Specific tenure and royalties will be explored to encourage investment through consultations with government industry communities and First Nations.

Petroleum Registry
Energy Plan 2007 contemplates a new petroleum registry that will function as essential database to improve the quality and management of volumetric, royalty and infrastructure information associated with the industry to promote competition while providing transparency around oil and gas activity.

Technology Transfer Incentive Program
A new oil and gas technology transfer incentive program will be considered to encourage the research, development and use of innovative technologies to increase recovery of existing reserves and encourage responsible development of new oil and gas reserve strength. Royalties may be adopted to recover program costs overtime.

Policy Action Items - Electricity Sector
Self-Sufficiency in Electricity
Energy Plan 2007 states that British Columbia is to be “self-sufficient” in electricity by 2016, including incremental BC electricity supply for “insurance” purposes. The plan itself provides very few details on the manner in which this objective is to be accomplished, or indeed what “self sufficiency” means, although the issue has been the topic of significant debate in BC Hydro’s recent Integrated Electricity Plan and Alcan energy supply contract proceedings before the BC Utilities Commission.

As one way of addressing electricity self sufficiency BC Hydro will be directed to develop a standing offer program where small green generation projects (under 10 MW) will have a standing offer from BC Hydro to purchase plant output at a fixed price. This simplified process is intended to encourage the development of small green IPP projects.

There are a number of other policy initiatives which seem designed to assist private sector IPP proponents to successfully develop independent power projects. As well, BC Hydro and government will enter into initial discussions with first nations, the Province of Alberta and communities regarding the Site C project on the Peace River.

Investment in Transmission Infrastructure
Energy Plan 2007 contemplates further investment in transmission infrastructure by BC Transmission Corporation. Of note, BCTC will follow an approach that builds infrastructure in advance of need. This will likely mean that electricity consumers generally, rather than individual customers or generators such as IPPs, will pay for at least some system upgrades. BCTC and government will also develop a congestion relief policy to ensure that facilities are planned and built with a view to
relieving transmission system congestion. Finally, reliability standards consistent with industry developed standards will be introduced in BC after consultation with industry to discuss options for implementation.

DSM to Meet 50% of BC Hydro’s Incremental Resource Needs by 2020
A very aggressive demand side management (DSM) target of 50% of incremental resource needs by 2020 has been established for BC Hydro. This compares with a target of about 33% in BC Hydro’s current preferred resource portfolio. To assist in meeting this goal, government has indicated in Energy Plan 2007 it intends to explore new rate structures that encourage energy efficiency and conservation, and technology to provide customers with useful information about their electricity consumption to allow them to make informed choices. Additionally, Energy Plan 2007 contemplates changes to BC’s Building Code that by 2010 would require new buildings to meet certain energy efficiency standards.

GHG Emissions from Generating Plants to be Curtailed or Eliminated
All new electricity generating plants “connected to the grid” will be required to have “zero net” GHG emissions, and all existing plants will be required to have “zero net” GHG emissions by 2016. Any coal-fired plants in BC, by contrast, will be required to have “zero” GHG emissions. Thus, while non-coal thermal facilities will be able to acquire carbon offsets to mitigate their GHG emissions, coal-fired thermal facilities will not be granted that indulgence.

Wood Waste Energy Call
BC Hydro will issue a call for electricity targeted to technologies that burn sawmill residues, logging debris and timber affected by the mountain pine beetle infestation.

Remote Community Electrification
BC Hydro is to expand or take over electricity service in remote communities that are not currently served by BC Hydro.

Policy Action Items – General
Innovative Clean Energy Fund
A $25 million dollar annual fund(1) will be established through a charge on all energy utilities in BC to help “promising clean power technology projects to succeed.” To be eligible for funding, projects will have to address specific environmental and energy issues identified by government, showcase BC technologies with potential for application elsewhere and demonstrate commercial viability.

(1)We infer it is an annual fund, although the plan is not explicit on this point.

For more information please contact the head of our Energy Law Practice Group, Chris W. Sanderson at 604.631.9183 or [email protected].

The information provided in this newsletter is for general information purposes only and should not be relied on as legal advice or opinion. If you require legal advice on the information contained in this newsletter, we encourage you to contact any member of the Lawson Lundell LLP Energy Law Team.

© Lawson Lundell LLP, 2007.
All rights reserved.

 

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