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Update: The winds of change (part 1) – Newfoundland and Labrador Government signaling major shift in energy policy

John Samms and Matthew Craig

Further to our original article published on May 17, 2022 (included below), on the changing energy policy frameworks in Newfoundland and Labrador, the government amended the Order in Council (“OC”) that had previously banned environmental assessment and issuance of Crown titles. The timing of the publication of the Order in Council is not clear. The exact text of the amendment states:

 

The Lieutenant-Governor in Council is pleased to amend OC2006-026 to allow
industrial customers seeking to self-generate wind energy for their own consumption,
and industrial customers or retailers seeking to generate wind energy for export, to
apply for Crown leases or grants, under the authority of the Lands Act, and
Environmental Assessments, under the authority of the Environmental Protection Act.

 

As a result of this amendment, proponents may now apply for Crown titles and environmental assessment approval.

However, it is not expected that any crown land applications will be approved until the provincial government finalizes its policy framework in respect of crown land acquisition from a wind energy perspective. Further, proponents who fall into the category of industrial customers, such as hydrogen producers, will still need to seek an exemption from the Electrical Power Control Act prohibition on private generation of supply or electricity in order to develop, own, operate, manage or control a facility for the generation and supply of electrical power of energy either for its own use or for the public.


Original article – May 17, 2022

In uncertain economic times like these, “open for business” is a welcome phrase by leading Ministers in Newfoundland and Labrador.

For years, Newfoundland and Labrador’s wind generation policy was, for better or worse, easy to explain: we have a bountiful wind resource, but now is not the time to use it. Notwithstanding the ideal synergies eminent in the interaction of wind and hydro resources (if it does not blow, we can control the flow – all in a low-carbon manner), recent development of hydro precluded the development of wind resources on the island portion of the province through amendments to the Electrical Power Control Act (“EPCA”).

Now we feel the winds of change. On April 5, 2022, Minister Andrew Parsons announced the “end of moratorium on wind development”. The announcement was made through a Ministerial Statement in the House of Assembly.

Impediments to wind generation exist, with an escape hatch

Legally speaking, absolutely nothing has changed quite yet. The major impediments to wind generation still technically exist.

The Generation Monopoly

Under Section 14.1(2) of the EPCA, no one may “develop, own, operate, manage or control a facility for the generation and supply of electrical power or energy either for its own use or for supply directly or indirectly to or for the public or an entity on the island portion of the province”. The main object of this provision was to guarantee Newfoundland and Labrador Hydro’s revenue pipeline intended to pay for the Muskrat Falls project. Any erosion of that has an adverse impact on rate mitigation – a dominant policy imperative for the Province during the last decade.

This provision of the EPCA has essentially precluded major industrial users on the island portion of the province (read: customers of Muskrat Falls power) from building their own energy resources.

The escape hatch: subsection 14.1(7) of the Act allows the province to exempt a retailer or an industrial customer from that provision. Despite this legislative contemplation of exceptions to the prohibition, it does not appear any have been granted – there is also no policy framework to grant such an exception.

Ban on Environmental Assessment and Issuance of Crown Land

In addition to the EPCA, a 2006 Order in Council (“OC”) outright bans issuance of Crown leases or grants for commercial wind generation projects that propose to produce energy for sale. That same OC bans any environmental assessment for such projects under the Environmental Protection Act.

This OC has been long rumoured to be on the chopping block, but the question remains: what is going to replace it? That remains to be seen.

Contenders vs pretenders

We are at the precipice of a paradigmatic shift in Newfoundland and Labrador energy policy and there are many players seeking to capitalize on it – we know there are over 8000 MW of requests for energy sitting on desks at Newfoundland and Labrador Hydro, which is four times the current capacity in the provincial system.

The contenders will need to separate themselves from the pack and they will need expert advice to do it. Not only expert advice on the legal dynamics at play, but also the advice necessary to foresee how the legal and policy imperatives facing the province will impact on a new regulatory framework. Minister Parsons effectively said the province is open for business. Not only that, the policy shift remains in transition. Now is the time to answer the government’s call, and take steps to prepare for what’s to come.


John Samms is one of Stewart McKelvey’s associates in energy law in Newfoundland and Labrador – before joining Stewart McKelvey in 2019, he worked in the Premier’s Office on energy related matters.

Matthew Craig is a Stewart McKelvey partner practicing in construction, natural resources, and energy law in Newfoundland and Labrador. Matthew worked at Stewart McKelvey as an associate before spending two years working as legal counsel to Nalcor Energy. He re-joined Stewart McKelvey in 2019. 


This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact a member of our Energy, Environmental & Natural Resources group.

Click here to subscribe to Stewart McKelvey Thought Leadership.


 

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