Bill 19: Alberta’s Proposed TIER System for Addressing Greenhouse Gas Emissions

By Sean Parker and Anna Fitz, Student-At-Law

Introduction

 

On October 29, 2019, the Government of Alberta introduced Bill 19, the Technology Innovation and Emissions Reduction Implementation Act, and Order in Council 213/2019, establishing the Technology Innovation and Emissions Reduction Implementation Regulation (“Regulation”). Bill 19 and the Regulation are aimed to facilitate implementation of the new Technology Innovation and Emissions Reduction (“TIER”) system. The Government’s stated intent for the TIER system is to reduce greenhouse gas emissions while protecting Alberta’s regulatory autonomy from federal intervention.

Bill 19 and the Regulation are proposed to come into force on January 1, 2020, except for certain sections.

Overview of Bill 19 and the Regulation

 

Bill 19 sets out the framework for the TIER system and the Regulation provides the processes and further detail on how the new scheme will be implemented.

In general terms, TIER will apply to facilities that emitted 100,000 tonnes or more of CO2 in 2016 or onward. These facilities will receive a specific benchmark to meet based on their past emissions.  They must then reduce their emissions by 10% in their first compliance year, plus an additional one percent each year thereafter. The Government will apply a $30/tonne carbon price on emissions.

Electricity generators have a different requirement: if they emit more than 100,000 tonnes of CO2 per year, they must comply with the benchmark of 0.37 tonnes of CO2 per megawatt-hour.

Facilities that will be subject to the TIER program can meet their obligations by:

• reducing emissions to the prescribed level;
• using credits from facilities that exceeded their reduction targets;
• using emission offsets from organizations which, although not regulated by TIER, have voluntarily reduced their emissions; or
• paying into the Technology Innovation and Emissions Reduction Fund (“TIER Fund”), which is essentially the Climate Change and Emissions Management Fund with a new name. 
  

Further, facilities subject to the TIER program will have the following reporting requirements:

• Yearly compliance reports that must, among other things, confirm the facility has not exceeded its allowable emissions per year, and be verified by a third party assurance provider;
• Forecasting reports in the case of facilities that emitted one million tonnes or more of CO2 per year.  Forecasting reports must include a forecast of the facility’s total regulated emissions for the following year;
• Emissions reduction plan reports are required where a facility has received cost containment designation under the Compliance Cost Containment Program.  This program is intended to provide transitional support to facilities experiencing economic hardship as a result of compliance costs. Where a facility has applied for and received cost containment designation, it must submit an emissions reduction plan report that includes financial statements and any benefits received under a government initiative.  Facilities with a cost containment designation will be reviewed annually to assess if the economic hardship remains pursuant to the defined criteria.
  

It is advisable for facilities captured under the TIER system to assess their potential new reporting obligations.

Opt In and Aggregate Provisions

 

Conventional oil and gas facilities that emit less than 100,000 tonnes of CO2 may apply to opt into the TIER program in the manner provided for under the Regulation.

A party that owns two or more facilities will be able to apply to have the facilities regulated together under TIER as an aggregate. Under this arrangement, the facilities are treated as one unit to streamline the regulatory process.

Emission Offsets, Emission Performance Credits and Fund Credits

 

As mentioned above, operators will have opportunities to offset their emissions to comply under the TIER system. This includes receiving emission offsets when they reduce, capture, or sequester greenhouse gases. In order to take advantage of emission offsets, operators must ensure that a third party assurance provider verifies offset projects. Operators should be mindful of deadlines that apply to the offset program. For example, operators must use:

• offsets from 2014 or earlier for 2020 at the latest;
• offsets from 2015 or 2016 for 2021 at the latest; and
• offsets from 2017 or later within eight years.
  

In addition to offsets, TIER also provides for two types of credits:

• Performance credits, for producing less emissions than the facility’s target; and
• Fund credits, for contributing to the TIER fund.
  

If a facility produces less emissions than the amount it is permitted, it may be eligible for performance credits where one credit represents one CO2 tonne. The facility can then apply its performance credits when determining its net emissions in a subsequent year. Performance credits could also be sold to other facilities that have failed to meet their reduction requirements. The same deadlines that apply to emission offsets apply to performance credits.

Fund credits can be purchased for a facility at a price that may be set by the Minister. However, only the facility which obtained the fund credits may use them and they can only be used once. If the facility obtained the fund credit on or before June 30th of a year, it can only use the credit for the previous year, unless it receives written authorization otherwise. If the facility obtained the fund credit after June 30th, it may only use the credit for that year, unless it receives written authorization otherwise.

Of note, facilities can only use offsets and credits to cover a certain percentage of their “true-up obligations” – the quantity by which their emissions exceed the facility’s allowable emissions for the year. Specifically, when determining its net emissions for a year, a facility cannot use emission offsets and performance credits to cover more than 60% of its true-up obligations. The facility also cannot use offset or credits from before 2017 to cover more than a combined maximum of 40% of its true-up obligations.

The TIER Fund 

 

One of the notable changes under the proposed new framework is how the Government may apply the TIER Fund. Under the current scheme, the Climate Change and Emissions Management Fund “may be used only for purposes related to reducing emissions of specified gases or supporting Alberta’s ability to adapt to climate change” (Climate Change and Emissions Management Act, section 10(3)). However, under Bill 19, the Minister may, subject to certain exceptions, transfer money from the TIER Fund to the General Revenue Fund. The significance of this change is that, under the new legislation, the TIER Fund could potentially be used for a broad array of purposes other than reducing greenhouse gas emissions or adapting to climate change, as mandated under the current legislation.

Takeaways

 

The TIER system is expected to come into force in approximately two months. Facilities that will be captured under TIER should assess potential new reporting and other obligations to ensure that they are in compliance, and to identify previous regulatory requirements that may no longer apply.

The new TIER system may also create opportunities for operators looking to improve their position. For further information on potential new opportunities or obligations your business may have under the new TIER system, please contact any member from our Environment, Energy, and Regulatory practice group.

Back to What We HADD: Introducing New Regulations under the Fisheries Act

by Marika Cherkawsky and JoAnn P. Jamieson

On August 28, 2019, the Federal Government introduced the Authorizations Concerning Fish and Fish Habitat Protection Regulations (the “Regulations”).  The new Regulations provide an updated process for the submission and review of applications for Fisheries Act authorizations, as well as a new scheme to support applications to amend, suspend or cancel previously issued authorizations.  The new Regulations were introduced under the recently amended Fisheries Act (the “Act”), which brought back the pre-2012 prohibitions against the death of fish and the harmful alteration, disruption and destruction of fish habitat (“HADD”), as well as providing for more comprehensive protection of fish and fish habitat in Canada.  

Submission and Review of Applications

 

The Regulations set out the information and documentation that must be submitted to the Minister to obtain an authorization to carry out work or an activity that results in the death of fish (section 34.4(2)(b) of the Act) and the HADD of fish habitat (section 35(2)(b) of the Act).  The Regulations provide that an applicant must be notified by the Minister within 60 days of receipt of an application as to whether the application is complete, incomplete or inadequate.  Upon completion of the application, the Minister must make a decision on whether to issue or refuse the authorization within 90 days.  The Regulations allow for the cessation or restarting of these time limits in certain situations, such as where consultation with Indigenous groups or the public at large is required before a decision can be made.

 

Factors to be Considered

 

In assessing applications, the Minister is required to consider the factors set out in section 34.1 of the Act, which include:

• the contribution to the productivity of relevant fisheries by the fish or fish habitat that is likely to be affected; 
• fisheries management objectives; 
• whether there are measures and standards 
• to avoid the death of fish or to mitigate the extent of their death or offset their death, or 
• to avoid, mitigate or offset the HADD of fish habitat; 
• the cumulative effects of the carrying on of the work, undertaking or activity referred to in a recommendation or an exercise of power, in combination with other works, undertakings or activities that have been or are being carried on, on fish and fish habitat;
• any fish habitat banks, that may be affected; 
• whether any measures and standards to offset the HADD of fish habitat give priority to the restoration of degraded fish habitat; 
• Indigenous knowledge of the Indigenous peoples of Canada that has been provided to the Minister; and 
• any other factor that the Minister considers relevant.

Amendments, Suspensions or Cancellations

 

The Regulations also set out a process for authorization holders to request amendments, suspensions or cancelations of authorizations.  The timeline for such requests are the same as those for an initial application for authorization.

In addition, the Regulations provide a process for the Minister, at his or her own initiative, to amend, suspend or cancel any authorization under circumstances such as where the Minister has reasonable grounds to believe that conditions in the authorization have not been or will not be met, or where new information demonstrating that the impact to fish and fish habitat is significantly greater than originally anticipated. The Minister will be required, however, to provide the authorization holder with written notice of his or her intention and provide the authorization holder with an opportunity to make written representations. 

Habitat Credits

 

The Regulations introduces “habitat credits” as an offsetting measure to counterbalance the possible death of fish and the HADD of fish habitat caused by the proposed work.  A “habitat credit” is defined as “a unit of measure that is agreed to between any proponent and the Minister”, which quantifies the benefits of a project that is carried on by a proponent for the purpose of creating, restoring or enhancing fish habitat within an area in order to acquire habitat credits for his or her future projects.  Going forward, the applicant may use his or her certified habitat credits as a proposed means of offsetting impacts from proposed work, rather than creating a new offsetting plan.

 

Additional Changes

 

The Regulations also introduce the following changes:

·        

• Applicants are allowed to rely on financial security aside from irrevocable letters of credit, in order to increase financial flexibility for applicants;
• Applicants must provide the geographic coordinates and small-scale site plan identifying the overall location and boundaries of the location of proposed offsetting measures;
• Applicants must include information about any consultation with Indigenous communities or groups and the public already undertaken prior to submitting the application; and
• The term “fish habitat” replaces the reference to “water source or water body” to better reflect an intent to obtain a description of the fish and fish habitat at the location of the proposed work.

Note that the federal Department of Fisheries and Oceans has committed to provide further guidance and clarification of a number of elements of the Regulation, including the definition of key terms such as “death of fish”, “fish habitat”, and the “harmful alteration, disruption, or destruction” of fish habitat as well as clarification around the concept of the habitat banking system and use of habitat credits.

Conclusion

 

The amended Fisheries Act seeks to improve the protection of all fish and fish habitat in Canada, not just those related to a “commercial, recreational or Aboriginal fishery” or when there is “serious harm to fish” as stipulated under the previous version of the Fisheries Act. The implementation of the Regulation provides a detailed scheme to accomplish that stated objective.

Alberta’s “Turning Off the Taps Legislation” Put on Hold

By Madyson Dietrich, Student-at-Law

Following Kinder Morgan’s decision to suspend all non-essential work on the Trans Mountain pipeline in 2018, the Alberta Legislature passed the Preserving Canada’s Economic Prosperity Act, SA 2018, c P-21 (the “Act”). 

Frequently referred to as the “Turning off the Taps Legislation,” the Act empowered Alberta’s Energy Minister to require exporters of natural gas, crude oil, or refined fuels to obtain a license. One factor to be considered when granting licenses was whether pipeline capacity existed to maximize the return on crude oil and diluted bitumen produced in Alberta.

British Columbia challenged the Act’s constitutionality and applied for an injunction suspending the legislation from operating. Alberta sought to strike BC’s action. 

In British Columbia (Attorney General) v Alberta (Attorney General), 2019 FC 1195, the Federal Court dismissed Alberta’s motion and granted an interlocutory injunction preventing Alberta’s Energy Minister from exercising powers permitted under the Act. 

Alberta’s Motion to Strike

Alberta applied to strike BC’s action on the basis that it was beyond the jurisdiction of the Federal Court, and was premature as no action(s) had been taken under the Act. The Federal Court found that it had optional jurisdiction over interprovincial disputes pursuant to section 19 of the Federal Courts Act. Additionally, it was not necessary for the Energy Minister to have actually exercised its authority prior to litigating the matter since the Act was being challenged as a whole. 

BC’s Interlocutory Injunction

Applying the well-known test for injunctive relief as set out in RJR-MacDonald, the Federal Court found in favour of granting the injunctive relief sought.  

A Serious Issue to be Tried 

Alberta argued that the Act was valid because section 92(a) of the Constitution Act provides that natural resources fall within provincial jurisdiction. However, the Federal Court found that section 92(a) did not save the Act because it was not related to primary production of natural resources and it authorized discrimination between provinces. 

Citing Hansard, the Federal Court concluded that the true intentions of the Act were to limit export of petroleum products from Alberta with limited application; the Act only appeared to be contemplated in relation to BC.  

Irreparable Harm 

The Federal Court accepted evidence that BC heavily relied on Alberta for a large portion of their gasoline and that a restriction would have immediate consequences on the province. In addition, the Federal Court considered Alberta’s failure to provide any examples of what would constitute a valid exercise of power under the Act. 

Balance of Convenience  

Although there is a presumption that challenged legislation was enacted in the public’s interest and it will serve as such, the Federal Court agreed that this was a clear case where an injunction should be granted. The Federal Court struggled to understand why the Act included a 2-year sunset clause if it was intended to serve a valid and non-discriminatory purpose. Overall, it was determined that the irreparable harm that BC would suffer if the injunction was not granted far outweighed any inconvenience that the injunction may impose on Alberta.  

Implications from the Decision 

While the injunction is interlocutory and the constitutionality of the Act has not been decided, there are strong indications that this legislation may be found to be unconstitutional. It is unclear how the new Alberta government will respond to this decision. 

This decision confirms, however, that section 92(a) is viewed as an exception to federal powers granted under section 91 and cannot be used to discriminate against other provinces. To do so would diminish Parliament’s power to regulate interprovincial trade. This demonstrates that the section 92(a) “exception” only grants the provinces limited power when it comes to natural resources. It is limited to primary production and not the exportation of refined or upgraded natural resources across provincial and international boundaries. Further, it does not prevent Parliament from enacting laws that would prevail over provincial legislation.

A hearing date has not been scheduled for a determination on the merits.