Category Archives: Energy

Now it really gets interesting

The electoral outcome of the British Columbia election was settled last week. This week it appears that a “coalition” agreement between the B.C. Greens and the New Democratic Party will serve to defeat Christy Clark’s government. The Agreement Text section 2 (c ) relates to Climate Change and reads as follows:

Immediately employ every tool available to the new government to stop the expansion of the Kinder Morgan pipeline, the seven-fold increase in tanker traffic on our coast, and the transportation of raw bitumen through our province. (Emphasis added.)

Over the coming months, both journalists, government officials, and lawyers from many constituencies will be pressing their claims. A range of litigation respecting the pipeline have been “joined” and will likely wind up before the Supreme Court in the fall. The cases involving a challenge to the authority of the National Energy Board are found on the agency’s Website. There are over 25 separate filings.  Applicants include the Cities of Vancouver and Burnaby and many indigenous nations including: Tsleil-Waututh Nation, the Squamish Nation, Coldwater Indian Band, Kwantlen First Nation, Cheam First Nation, Chawathil First Nation,  Stk’emlupsemc Te Secwepemc Nation, Upper Nicola Band, and the Musqueam Indian Band. In addition, Raincoast Conservation Foundation and Living Oceans Society are also challenging the NEB’s decision.


In Alberta, Premier Rachel Notley has signaled strongly her government’s position that Alberta will not permit the B.C. government thwarting the construction of the pipeline. As a passionate advocate for Kinder Morgan (an American-owned concern), she risks alienating some of her membership who have questioned the wisdom of doubling down on fossil fuels. Mayes cartoon31-5-17 EJBut Notley’s embrace of the oil industry shows her pragmatic side. “Big Oil” still employs many workers, including high paid, unionized construction workers and pipeline employees. Her early speeches made as the business community began to determine if she were ideological, were comforting. In a speech at the Calgary Stampede Investment Forum on 7 July 2015 she said:

This attitude of pushing the limits of what’s possible influences every aspect of the oil sands, from research and development to environmental management to the service and support fields. It’s a tremendous asset which has transformed Alberta into one of the world’s leading oil producers. And I’m here today to emphasize that the province has a government determined to defend this advantage, by being constructive at home, and by building relationships around the world. (Emphasis added.)

In New York in September 2015, she addressed the RBC Capital Markets investment forum:

We will be honest, thoughtful partners to enterprise. And we will maintain a warm welcome for investors, and uphold their right to earn fair returns on their investments. This definitely applies to energy.T he energy industry is very important to Alberta and always will be. In addition to having the third-largest oil deposits in the world in the oil sands, we also have abundant conventional oil and natural gas…as well as renewable forms of energy, especially wind and solar power. We’re an energy province and that’s not about to change. To expand existing oil sands projects, establish new opportunities in the energy economy, and pioneer advanced technologies – all this requires investment on a large scale. So under our government’s leadership, Alberta’s abundant oil and gas reserves will remain wide open to investment. (Emphasis added.)

Premiers, even social democratic ones, do recognize that capital markets (which are now supplying over a quarter of the government’s financing this year), need to be assuaged. Both the royalty report and the Climate Change report were crafted with financial markets as a key audience. So the battle with the British Columbia government in now on. Although Ms. Notley has tacked rightward, she still needs to be wary about Alberta environmental constituencies.  A key step will be to ensure that Kinder Morgan uses its considerable resources to make absolutely sure its current and future pipeline systems are the safest in the world. A meeting with the proponents to convey that message would be to Alberta’s advantage.

Trans Mountain’s necessity questioned as tanker traffic slumps17-6-17 GM

Notley says PM still backs Trans Mountain15-6-17 GM

PM remains ‘committed’ to pipeline, Notley says15-6-17 EJ

Coalition asks banks to shun pipeline13-6-17 GM

Neighbours, professors more reliable on energy issues- poll8-6-17 EJ

Governing looks easier when you’re in opposition10-6-17 GM

Trans Mountain will test Confederation 10-6-17 GM

A pipeline rattles the political landscape3-6-17 GM

Trudeau and Notley must hold firm on Trans Mountain expansion9-6-17 EJ

Kinder Morgan says it won’t make more Trans Mountain concessions3-6-17 GM

Notley brushes off B.C. Greens3-6-17 EJ

Notley could benefit from Trump’s climate pact pull-out3-6-17 EJ

Trans Mountain changes off table3-6-17 EJ

Legal Notice Trans Mountain Pipeline ULC2-6-17 EJ

Minister calls B.C. Green Party leader ‘hypocritical’ for criticism of Notley2-6-17 EJ

How a splash of green ruined a match made of orange2-6-17 GM

A Tangled Pipeline Battle1-6-17 EJ

No B.C. government has right to block pipeline, Notley warns17-5-17 GM

Notley to B.C. Hands off pipeline17-5-17 EJ

Notley took the biggest loss in B.C. election13-5-17 GM

‘Our pipeline’ Notley’s elusive Holy Grail31-5-17 GM

PM defends Trans Mountain as BC Greens, NDP gear up for fight31-5-17 GM

‘That pipeline will be built’31-5-17 EJ

Trans Mountain faces new risk from NDP, Greens30-5-17 GM

Trans Mountain proponents headed for showdown with B.C.31-5-17 EJ

TransMountain IPO comes at bad time for Kinder Morgan20-5-17 GM

‘Ugly Storm’ hits debut of Kinder Morgan31-5-17 EJ

The Donald makes good

The day before Robbie Burns Day was an especially propitious day for executives at TransCanada Corporation.  Two working days into office and the new U.S.  President has “delivered”  on the promise to revive the Keystone XL pipeline from Hardisty Alberta to Steele City on the border of Nebraska and Kansas. The decision is subject to terms being negotiated with the proponents, presumably to achieve some return to the U.S. Treasury and to U.S. construction and factory workers.  Several commentators have noted this negotiation may be similar to the “shake-down” orchestrated by Premier Christy Clark with the Trudeau government’s approval of the Kinder-Morgan TransMountain pipeline. keystone-xlWhile jubilation appeared to reign in the office towers in Calgary, environmentalists and indigenous leaders promised to carry on the fight to stop the transport of bitumen to the gulf coast.

The expansion, if completed, will add another 1.1 million barrels per day of shipments over and above the roughly one million barrels being exported via Kinder Morgan and Enbridge’s Line 3 to the U.S. mid-west.   After the Obama administration rejected TransCanada’s proposal, in January 2016 the company filed a Notice of Intent to initiate a claim under Chapter 11 of the North American Free Trade Agreement (NAFTA) seeking $15 billion in costs and damages due to the rejection of the proposed line. The company took a $2.9 billion after-tax non-cash impairment charge in February 2016.

With the political momentum appearing to shift from environmental sympathies to economic development in Washington, Ottawa and Edmonton, pressure will next be applied on Canadian governments to make Canada’s regulation, taxation, and royalty regimes “competitive”.  This will now become necessary in order to fill the pipes.

A recent article by Professor Thomas Gunton, Director  of Simon Fraser University’s Resource and Environmental Planning Program in The Globe and Mail questioned the wisdom of all the added pipeline capacity. [is-canada-setting-itself-up-for-a-pipeline-glut13-1-17-gm]  Unless the industry finds a way to fill the pipes, the shippers will pay the pipeline utilities. This may be the next fight but the oilsands producers must convince a New Democratic government and its regulators of the desirability or necessity of further expansion.

Advisory group calls for fines if oil industry nears emissions ceiling17-6-17 EJ

Burden on oilsands grows as panel sets strict carbon diet17-6-17 EJ

Green advocate dropped from panel17-6-17 EJ


Trans Mountain faces new risk from NDP, Greens30-5-17 GM

Disputes pile up along Trans Mountain route29-5-17 GM

TransMountain IPO comes at bad time for Kinder Morgan20-5-17 GM

Opposition to pipeline is not obstructionist20-5-17 GM

Mayes Cartoon16-5-17 EJNEB needs major overhaul, panel says16-5-17 GM

Energy analyst criticizes call to report climate change risks17-5-17 GM

Canadian oil could be trump card in NAFTA negotiations17-5-17 GM

Notley took the biggest loss in B.C. election13-5-17 GM

No B.C. government has right to block pipeline, Notley warns17-5-17 GM

Notley chills as B.C. churns17-5-17 GM

Notley to B.C. Hands off pipeline17-5-17 EJ

A Precarious Future11-5-17 EJ

B.C. vote puts heat on Notley11-5-17 EJ

Kinder Morgan eyese IPO for pipeline plan11-5-17 GM

Regulator considers review of Energy East emissions11-5-17 EJ

No firm timelines yet for Keystone XL or Energy East, TransCanada CEO says6-5-17 EJ

Notley doubts Clark has right to add coal tax4-5-17 GM

A last Gasp for KXL activists in Nebraska3-5-17 EJ

Border tax won’t hurt Encana, CEO says3-5-17 GM

Notley says Canada will have many allies if Trump goes after energy trade25-4-17 GM

Notley is right to play the China card21-4-17 GM

Time to stop being awash in red ink and phase out oilsands21-4-17 EJ

Canada warns U.S. on pipeline exclusion13-4-17 GM

Carbon tax requires trust in government11-4-17 EJ

Emissions heavy sectors raise concerns about carbon taxes’ effects on growth13-4-17 GM

Don’t try to ‘steal’ our businesses, Notley warns Wall31-3-31 EJ

Alberta not reversing course on climate change to match U.S.30-3-17 EJ

Calgary Economic Development wary of Wall’s pitch to oil execs30-3-17 EJ

Saskatchewan Premier invites energy companies to relocate30-3-17 GM

Canadian finance minister stands behind federal budget’s tax changes for oilpatch28-3-17 EJ

Trump approves KXL, but battles remain25-3-17 EJ

Trump clears way for Keystone XL pipeline25-3-17 GM

Energy companioes decry tax clampdown24-3-17 GM

Keystone pipeline poised for approval24-3-17 EJ

U.S. State Department set to approve Keystone XL24-3-17 GM

Dependence on U.S. oil markets declining11-3-17 EJ

Opposition jumps on Shell oilsands divestment to attack NDP policies11-3-17 EJ

Half of Canadians back Keystone XL- survey9-3-17 EJ

Energy firms urged to better engage public7-3-17 EJ

Energy leaders defend free trade7-3-17 GM









































(Disclosure: the writer owns shares of Enbridge and TransCanada Coproration)

The Matter of “free, prior and informed consent”


Shawn McCarthy’s column of 16 September first-nation-sets-pipeline-precedent12-9-16-gm discussed the question of what “consent” means to First Nations’ communities through which proposed pipelines run through. In Alberta, the New Democrat government agreed to be bound by the United Nations Declaration on the Rights of Indigenous Peoples. The federal government also  agreed to be so bound after taking office from the Conservative government last October. The federal government has not yet officially agreed to the Declaration.

In McCarthy’s view the recent decision by the U.S. federal government to stop development of the $3.7 billion oil pipeline through sacred territory of the Standing Rock Sioux reservation signals a growing sense of community and co-operation between First Nations opposing pipeline development. For pipeline developers the specter of litigating “free, prior and informed consent” consistent with the U.N. declaration must be daunting. What some observers of the Kinder-Morgan TransMountain project thought would be a fairly easy process, given the pre-existing pipeline and right of way, now looks challenging.

So what does the Declaration say? Firstly, the rehearsals in the preamble will keep lawyers and judges busy for the next century.  As drafted, the document is a consensus document whose preamble attempts to address a wide range of sensibilities through “acknowledging,” “recognizing,” “confirming,”  “affirming,” “encouraging,” and “bearing in mind” certain principles and historical events (in the most general terms). Article 1 seems bizarrely to affirm that indigenous peoples are persons and enjoy all the rights and fundamental freedoms  under the U.N. charter. Article 2 declares indigenous peoples “are free and equal to all other peoples.”

More controversially to nation states is Article 3 that states “Indigenous peoples have the right to self-determination: while article four states: indigenous peoples “have the right to autonomy or self-government in matters relating to their internal and local affairs, as well as ways and means for financing their autonomous functions.”  The latter point has also been a bone of contention as resource development in most developed and undeveloped states has meant royalties to regional or national governments but not to First Nations.

Adding another wrinkle is article 6 -“Every indigenous individual has the right to a nationality.”  This statement along with articles three and four would appear to strengthen First Nations’ claims  to self-government in courts of national jurisdiction.

Article 8,  section 1 provides that Indigenous peoples are not to be forced to assimilate  or see their culture destroyed. Subsequent articles recognize indigenous groups ability to establish and operate their own educational systems, preserve their languages, culture and media.

Article 19 reads in full:  “States shall consult and cooperate in good faith with the indigenous peoples concerned through their own representative institutions in order to obtain their free, prior and informed consent before adopting and implementing legislative or administrative measures that may affect them.” While not speaking directly to resource development, this provision along with articles declaring rights to  improve . “their economic and social conditions, ” while states shall take measures to 
“ensure continuing improvement of their economic and social conditions. “

Articles 26 through 32 address questions of indigenous peoples’ rights to their lands and to development on these lands.

Article 26
1. Indigenous peoples have the right to the lands, territories and resources which they have traditionally owned, occupied or otherwise used or acquired.
2. Indigenous peoples have the right to own, use, develop and control the lands, territories and resources that they possess by reason of traditional ownership or other traditional occupation or use, as well as those which they have otherwise acquired.
3. States shall give legal recognition and protection to these lands, territories and resources. Such recognition shall be conducted with due respect to the customs, traditions and land tenure systems of the indigenous peoples concerned.

Article 27
States shall establish and implement, in conjunction with indigenous peoples concerned, a fair, independent, impartial, open and transparent process, giving due recognition to indigenous peoples’ laws, traditions, customs and land tenure systems, to recognize and adjudicate the rights of indigenous peoples pertaining to their lands,
territories and resources, including those which were traditionally owned or otherwise occupied or used. Indigenous peoples shall have the right to participate in this process.

Article 28
1. Indigenous peoples have the right to redress, by means that can include restitution or, when this is not possible, just, fair and equitable compensation, for the lands, territories and resources which they have traditionally owned or otherwise occupied or used, and which have been confiscated, taken, occupied, used or damaged without
their free, prior and informed consent.

Article 32
1. Indigenous peoples have the right to determine and develop priorities and strategies for the development or use of their lands or territories and other resources.
2. States shall consult and cooperate in good faith with the indigenous peoples concerned through their own representative institutions in order to obtain their free and informed consent prior to the approval of any project affecting their lands or territories and other resources, particularly in connection with the development, utilization or exploitation of mineral, water or other resources.
3. States shall provide effective mechanisms for just and fair redress for any such activities, and appropriate measures shall be taken to mitigate adverse environmental, economic, social, cultural or spiritual impact.

The acceptance of the U.N. declaration by the Alberta and federal governments constitutes a vast legal obligation to recognize, respect, consult, finance, and in effect undo many of the structures that have governed the relationship between the Canadian state and First Nations over the past 150 years. For those working in the fossil fuel industry, the obligations now assumed by Ottawa and Edmonton will (1) be adjudicated for years, if not decades or (2) settled constructively, respectfully, and with a view to the long term sustainability of both indigenous and non-indigenous communities.

Cartoon Edmonton Journal13-5-17 EJ

Indigenous pipeline opponents take fight to banks that finance project expansions10-5-17 GM










first-nations-sue-transcanada-to-refine-consultation-process10-1-17-gman-alberta-sized-hole-in-trudeaus-credibility14-1-17-ejThe Inside Story of Kinder Morgan’s Approval14-1-17 EJ

















A pipeline compromise Alberta can agree with 2-12-16 EJ














































Electricity De-Regulation and the “Enron clause”

The de-regulation of electricity markets was a cornerstone policy of the Klein years. Recently the government has commenced legal proceedings to roll back a clause in the Power Purchase Agreements (PPAs) known as the “Enron clause.”

Mayes cartoon 8-8-16 EJMAYES- Edmonton Journal 8 August 2016

The government claims that the last minute insertion of the clause “or more unprofitable” was carried out without proper public debate and discussion.

It is perhaps under-stating the case that electricity de-regulation in Alberta is “complex”. Historically, electricity rates for both retail and commercial customers were set by the Alberta Utilities Board who determined what rate of return the electricity provider would receive. Underlying regulation was a concept that electricity was central to the well-being of citizens and business enterprises and a stable market supplying electricity was in the public interest. This attitude shifted during the 1980s with the Thatcher reforms in Britain’s electricity and telecommunications industries. A key concern revolved around both the willingness of utility firms to supply electricity and the availability of capital to finance new generation capacity.

De-regulation in Alberta resulted in the carving up of industry into three main parts: generation, transmission and distribution. Electricity prices would be set in open markets on a hour by hour basis under a system overseen by the Alberta Electricity System Operator. In order for generation to come on line, long-term PPAs were required to give assurance to creditors and investors in generation facilities that long-term contracts at agreed to pricing would support the huge investments necessary. The Balancing Pool was created in 1999 to “manage generation assets in a commercial manner, specifically any Power Purchase Arrangements (PPAs) held by the Balancing Pool that include the right to exchange electric energy and ancillary services, and any arrangements or agreements derived from these assets and to forecast revenues and expenses related to PPAs, to estimate the surplus or deficiency from the management of these contracts; and more generally to prudently manage risks of the systems operations. .

It’s time the Balancing Pool cut its losses on PPAs7-6-17 EJ

Power regulator investigates Balancing Pool complaints10-5-17 EJ

Privacy commissioner probes deleted government emails21-4-17 EJ

Credit downgrade hits power firms5-4-17 EJ

New risks emerge for firms exposed to climate change5-4-17 GM

Rural landowners could be in for windfall as province goes green5-4-17 EJ

Alberta to borrow $2B to cover electricity losses1-4-17 EJ

Learning from Ontario’s green energy gaffes1-4-17 EJ

Review of NDP change to electrical system now underway1-4-17 EJ



Chassin and Milke Paper- Montreal Economic Institute

E-mails detail Enron’s role in setting up Alberta’s energy fight8-8-16 GM

Enron boasted about PPA shift8-8-16 EJ

Even Klein was stymied by power deregulation6-8-16 EJ

Three words crux of power struggle6-8-16 EJ

Mayes cartoon9-8-16 EJMAYES- Edmonton Journal 9 August 2016

‘We have done nothing wrong,’ Enmax says9-8-16 EJ

Cancelled contracts could cost Albertans $600 million-report10-8-16 GM

Loss from PPAs closer to $600 M, economists say10-8-16 EJ

Prominent economists Andrew Leach  (Alberta School of Business)  and Trevor Tombe (University of Calgary) waded into the PPA debate with the release of their 16-page study published by the UofC’s School of Public Policy.The economists dispute the “up to” $2 billion number given by the provincial government– a fact that attracted media attention.

The paper dis-aggregates the different sources for the $2 billion estimate into 3 segments while examining seven PPAs (Keephills, Sundance C, Sundance B, Sheerness, Genesee, Sundance A, and Battle River5). The first piece is a change in government policy resulting from changes to the Specified Gas Emitters Regulation (SGER) initiated in June 2015 – a key early initiative by the NDP government. (Specified emitters are those facilities which produce more than 100,000 tonnes of emissions or more in 2003.) This change increased the charge for emissions from $15 per tonne of Carbon dioxide to $20 in 2016 and to $30 in 2017.

The second government policy change took place in November 2015 after  the release of the Climate Change Panel report, chaired by Andrew Leach. After the Leach Report was tabled, the Government adopted the recommended Carbon Competitiveness Regulation (CCR).  This change affected coal power generators, who, under the previous regime received   “credits based on 88 per cent and 80 per cent respectively of their own historic  emissions intensity for free in 2016 and 2017, and would only pay the carbon price on approximately 12 per cent, and subsequently 20 per cent, of their emissions.” (Leach and Tombe, p. 5). However, under the new CCR, coal-fired plants only received credit for one-third of their emissions, thus causing the cost of coal-fired generation to increase. Leach and Tombe calculate that the effect of the CCR increased the cost of a megawatt hour (MWh) of electricity by $15 per MWh after the June 2015 regime.  Some of the coal -fired generators were advocating for an emissions cap and a cap and trade system and were therefore disappointed the Panel did not recommend this “mass-based” approach.

The third part of the determination of the market value of  PPAs was the significant decline in power prices. Futures prices for electricity have fallen from about $55-$60 MWh in the summer of 2015 to  $42-$48/MWh by July 2016. These prices however are considerably higher than current spot prices of less than $20/MWh. With this data, Leach and Tombe show the breakdown between the three factors driving the change in the market values for these seven PPAs. From a positive value of almost $1.5 billion last summer, these seven contracts are estimated to be worth about negative $900 million. Policy changes account for about half the change in value and market prices the other half.

So what is the big fuss. The economists note that Albertans benefit now from already low electricity prices. If prices remain low the balancing pool will absorb the losses and send the bill to the consumers.  Should prices rise, the value of the PPAs would rise and the costs  of the PPA termination to the Balancing Pool would fall reducing any charges to consumers. As far as the Enron clause is concerned, the authors observe that it” was unlikely the intent of original section 4.3(j) for PPA holders to avoid both policy-driven and market-based losses.”