The Lexpert Guides to the Leading US/Canada Cross-Border Corporate and Litigation Lawyers in Canada profiles leading business lawyers and features articles for attorneys and in-house counsel in the US about business law issues in Canada.
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24 | LEXPERT • June 2017 | www.lexpert.ca/usguide-corporate/ es have experience with these regimes." For example, he says, in British Columbia there has been a general carbon tax since 2008. In Alberta, there's been the Specified Gas Emitters Regulation (SGER) since 2007, which applies only to large industrial emit- ters. Ontario implemented its cap and trade regime in 2016. Still, if you talk to lawyers who practice in the energy field as to the near-term effects of the pan-Canadian framework, the con- versation ultimately veers toward changes — and subsequent op- portunities and challenges. Booth, who practices in Calgary, cites the Alberta govern- ment's Climate Leadership Plan, including the 2017 Climate Leadership Act, which introduced a carbon levy in Alberta as an economy-wide tax on combustion and, in some cases, emis- sions, of greenhouse gas (GHG). The Alberta carbon levy does not change the SGER regime, which continues to apply to large industrial emitters. Rising Renewable One aspect of the pan-Canadian framework, says Nick Williams, a partner with Davies Ward Phillips & Vineberg LLP in Toronto, is the reduction of emissions through increased use of renewable energy. Ontario, British Columbia and Québec have already invested heavily in renewable energy. As an example, Ontario phased out all coal generation as of 2014. Alberta has announced that it is going to phase out coal and generate 30 per cent of its electricity through renewable power by 2030. As a result, says Williams, many in the power industry are look- ing at Alberta as the next province that will create opportunities for developers, investors and others in renewable energy projects. "Also, Saskatchewan, which did not endorse the framework, is encouraging investment in renewable energy and recently issued an RFQ for 200 megawatts of wind power." He says the Mari- time provinces have also seen a considerable number of renewable energy projects developed. In Alberta, says Booth, there are large and small investment opportunities in wind, solar and other renewable generation proj- ects. The first renewables tranche is for 400 MW to be awarded in late 2017 for service by late 2019. "There is a five-megawatt minimum per project, and eligible electricity sources include any of water, wind, solar or biomass," he says. "However, these proj- ects must supply to the existing grid, which is a condition that will remove some potential projects from being eligible to partici- pate in this first tranche." Chris Christopher, a partner with Torys LLP in Calgary, says renewable energy developers, whether they're situated in Europe or Canada or the US, "have capital ready to invest and they're looking for opportunities to deploy it for a number of reasons: they believe in renewable energy and/or the technology is improv- ing so the cost of deploying these technologies is decreasing, and the profits are therefore increasing." In addition, says Christopher, "these days, Canada may look like happy times to US renewables investors, particularly for those who are wary of a Trump administration. Because in the US, those developers have, under the Obama administration, relied on federal assistance." In contrast, says Christopher, "con- sider [President] Trump's comments on climate change and his apparent focus on traditional forms of energy." Still, the rosy picture in Alberta, for example, is not without challenges, he adds. Debt financing for renewable energy projects is typically repaid using revenue from operations, says Chris- topher. So investors, banks and other financiers are looking for certainty on income. But, in Alberta, he says, "we don't have that certainty because Alberta's energy market is currently set up as an energy-only market, so the prevailing power pool price is what you would get, and currently, electricity prices are low." Consequently, in these early days at least, Christopher sug- gests, "companies that can 'balance sheet finance' a project — funding the project through their own cash flow or corporate debt facilities based on their balance sheet, as opposed to relying on cash flow from the actual project — may find the province more attractive." Looking forward, the Alberta government, says Christopher, has proposed a subsidy through its renewable energy program that's basically a contract for differences. The project finance industry in Canada has developed over the years, with Ontario, Québec and British Columbia primarily benefiting, says Bertoldi. In the renewables area, "the generator gets paid for what they've produced and the price is stipulated in the contract. So lenders look at this and say, 'Great, I know that in year five, with the escalator that's provided in the contract, this is the revenue for that project, so I'm willing to lend.'" She says if there's a 25-year life to a project where the develop- er receives a 20-year power purchase agreement, the lender will often match the loan to the duration of the power contract while allowing a small time buffer. "The challenge for Alberta is how to replicate that kind of structure, when Alberta's current market is a dynamic wholesale generation market where electricity prices are determined on an hourly basis through a competitive bidding process." Widespread Effects Booth is fielding questions from a broad range of US companies and their in-house counsel. That's because, although it's still early days, "the potential effects of the pan-Canadian framework and existing provincial climate programs are widespread, potentially impacting oil and gas companies, both non-renewable and renew- able power generators, and investors." He says it is still unclear how the different provinces and terri- tories in Canada will respond to the pan-Canadian framework. Alberta, British Columbia, Ontario and Québec, for example, will likely adjust their existing climate-change legislation to com- ply with the requirements of the framework. Others that do not "There's a whole universe of businesses that will benefit from these policies because of the opportunities to play their role in developing, financing, constructing and operating these facilities." Linda Bertoldi Borden Ladner Gervais LLP ENVIRONMENTAL POLICY