Nova Scotia the First to Dive In: What project developers need to know to navigate the new N.S. Marine Renewable Energy Regime
February 13, 2018
By Sara Mahaney, Associate at McInnes Cooper,
Peter L'Esperance, Associate at McInnes Cooper
The much-anticipated Nova Scotia marine renewable energy regime finally has the force of law. First introduced over two years ago, the Nova Scotia Marine Renewable-energy Act took effect on January 23, 2018. The Act makes Nova Scotia the first Canadian province to dive in: so far no other province has introduced a full marine renewable energy regulatory regime for waters within provincial jurisdiction. Seeking to fill the regulatory gap for federal waters, on February 8, 2018 the Federal government tabled Bill C-69, An Act to enact the Impact Assessment Act and the Canadian Energy Regulator Act, to amend the Navigation Protection Act and to make consequential amendments to other Acts (that still must work its way through the legislative process) setting out how it intends to regulate offshore renewable energy projects in Canadian waters not situated in a province.
The complete answer to charting a course for the good governance of Canada’s emerging ocean economy requires federal-provincial collaboration to develop robust and comprehensive regulatory regimes for realizing the full potential for a vibrant marine renewable energy industry off Nova Scotia’s shores. For now, project developers can look to Nova Scotia’s new Marine Renewable-energy Act and regulations for the regulatory certainty necessary to consider – and pursue – opportunities to develop new and innovative marine renewable energy projects in Nova Scotian waters.
Here’s how the new regime delivers more opportunities to project developers, and 15 of the key details project developers need to know to flush out a fulsome project plan to pursue those opportunities.
Nova Scotia’s new marine renewable energy regime opens the door to innovative technologies, and confirms where and what marine renewable energy projects are authorized, delivering the regulatory certainty that should support sustained investments.
Innovative Technologies. The new regime allows more innovative marine renewable energy projects because they no longer must fit into the FORCE or COMFIT models that restricted the kinds of previously approved projects. To date, Nova Scotia’s development of its marine renewable energy resources has effectively been limited to deployment of in-stream tidal energy devices at the Fundy Ocean Research Centre for Energy (FORCE) site in the N.S. Bay of Fundy, and under its Community Feed-In Tariff (COMFIT) program. Some such projects have proceeded despite the lack of a comprehensive regulatory regime based on individual agreements between FORCE, the N.S. Departments of Energy and Natural Resources, and participating tidal energy development proponents and COMFIT approvals issued to Fundy Tidal Inc. The new regime authorizes the N.S. Minister of Energy to issue permits and licences to FORCE and to holders of feed-in-tariff approvals for facilities that the Minister approved before the Act took effect (in fact, the Minister issued FORCE its permit under the Act shortly after it took effect). The Act also expands the existing marine renewable energy regime by providing for the development of diverse types of marine renewable energy generation technologies: in addition to tidal, energy generation technologies that harness energy from ocean waves, currents and winds blowing over marine waters can potentially be eligible.
Designated Areas. The Act also designates certain areas within the province for marine renewable energy activities:
- Priority Areas. The Act designates two “marine renewable-energy priority areas”, currently located in the Bay of Fundy and Cape Breton’s Bras d’Or Lakes.
- Marine Renewable-electricity Areas. The Act further designates smaller “marine renewable-electricity areas” (MREAs) within the larger Bay of Fundy Priority Area. There are currently four MREAs: the FORCE, Digby Gut, Grand Passage, and Petit Passage MREAs. In-stream tidal-energy converters are the only type of connected generators (generators used to produce marine renewable electricity for use or consumption onshore) that may be licensed to operate in each MREA. The maximum aggregate nameplate capacity of licensed generators that can be located in the FORCE MREA is 64 MW. The Digby Gut, Grand Passage and Petit Passage MREAs are each maxed out at 1,999 KW of aggregate nameplate capacity. The Ministers of Energy and of Natural Resources are authorized to recommend a MREA be amended, for example to specify other types of licensed connected generators or to vary the aggregate nameplate capacity, after a public consultation period. For any new MREAs, there must be a strategic environmental assessment; such assessments have already been completed for the two existing Priority Areas. The Minister of Energy must review a MREA within 20 years of its establishment.
New Licencing & Permitting Regimes. Proponents must have a licence or permit issued under the Act to construct, install or operate a generator, or a cable or any other equipment or structure used or intended to be used with a generator, within a Priority Area:
- Licences. The licensing regime is a reactionary, rather than a proactive, one: rather than proactively apply for a licence, proponents must await a call for applications. The Minister, either directly or by way of delegation to a Procurement Administrator, can issue a call for applications in respect of projects to construct, install and operate connected generators (including any cable or other equipment or structure owned by the licence-holder and intended to be used with the generators). Proponents can apply for a licence in response to and in accordance with the call for applications. The licencing process can happen quickly: the Department can begin accepting applications for licences within as little as one week after it announces the call for applications on the Department’s website.
- (Unconnected) Permits. Proponents can apply to the Minister for a permit to construct, install and operate unconnected generators, including any cable or other equipment or structure to be owned by the permit holder and used or intended to be used with the generators. These are generators being tested for the purpose of assessing their potential or capability for producing marine renewable electricity and not used to produce marine renewable electricity for use or consumption onshore. Proponents can also apply for a permit to construct, install and operate just the cable or other equipment owned by the permit holder and used or intended to be used with a generator.
- Demonstration Permits. Following amendments to the Act the Legislature passed late in 2017, a “demonstration permit” program is available to proponents for innovative technologies or designs that differ from marine renewable energy projects currently under development in Nova Scotia. Demonstration permits will allow innovative connected generators to demonstrate to the Minister the generator’s potential or capacity to produce marine renewable electricity. To qualify, the generators must be wholly or partially located within a Priority Area and not exceed 5 MW of aggregate nameplate capacity. Proponents can proactively apply for a demonstration permit, rather than wait for a call for applications; the Application form and guidance materials for filling out the Application form are available on the N.S. Department of Energy’s website. Demonstration permit holders that connect to the electrical grid of a public utility in the Province are deemed to have entered into a power purchase agreement (or “PPA”) with the public utility at a price to be determined by the Minister of Energy. A proponent must submit with its application information about projected costs and project financing information (including a list of investors) to support calculation of the appropriate PPA rate.
Remaining Constraints. The commercial sale of electricity for onshore use and consumption is, for most marine renewable energy project developers, the business objective. A connected generator is the only type of generator that can supply electricity for onshore use and consumption. As described earlier, proponents of projects seeking to supply electricity for use or consumption onshore with connected generators must fall under either the Act’s licensing process or its demonstration permit process. Practically, the commercial opportunity to sell electricity onshore under these processes is still largely limited to in-stream tidal energy generation, though it’s still early days, and there is scope for the regime to develop as the marine renewable energy industry matures:
- Limited Licences. The Act’s licensing process applies only to connected generators located in one of the Act’s designated marine renewable-electricity areas (MREAs) – and the only type of connected generator that currently may be licensed to operate in each of the MREAs is in-stream tidal energy converters. The Act does provide for the permitting of unconnected generators, which may use any of the marine renewable energy generation technologies the Act permits regardless of location – but these don’t supply electricity for onshore use or consumption. However, the Act provides for amendment of both the authorized areas and the authorized technologies.
- Pricing Uncertainty. There’s also still some commercial uncertainty around the price that proponents will get for electricity they can sell onshore. Connected generators can connect to a public utility’s electrical grid, or an onshore electricity consumer, in the Province. Grid-connected demonstration permittees are deemed to have entered into a power purchase agreement (PPA) with the public utility at a price determined by the Minister. But so far, there’s no offtake regime contemplated for grid-connected licensees and presumably those details won’t be available until the Minister calls for licensing applications under the new regime. And while there’s some opportunity for connected generators to supply onshore electricity consumers directly without connecting to the grid, the new regime doesn’t include details of how that might work.
KEY PROJECT PLANNING DETAILS
The new regime is only a framework but it’s a robust one. Here are 15 of the regime’s key details that project developers will need to know in order to flush out a fulsome project plan to pursue the new opportunities:
- Application Requirements. Applicants for a licence or a permit must provide certain information including: a schedule for the project’s entire life-cycle; technical information, surveys and plans; environmental monitoring and risk management plans; and information on public and Aboriginal engagement. Permit applicants must also provide information about alternative sites they considered and special site characteristics the applicant believes are essential to its activities. Demonstration permit applicants must also explain why they believe the generator is innovative.
- Environmental Monitoring Plan. As with any licensing and permitting regime, the Minister can impose certain terms and conditions on the licence or permit. Every licence and permit under the Act will be subject to the requirement that the proponent submit to the Minister and obtain approval of an environmental monitoring plan.
- Aboriginal Engagement. Project proponents must assist the Crown to meet its constitutional duty to consult by engaging with the Mi’kmaq of Nova Scotia. The Province has guides available for proponents engaged in consultation activities with the Mi’kmaq of Nova Scotia.
- Public Engagement. Citizen challenges to natural resources projects are increasingly common. As a best practice, project proponents should meaningfully engage with stakeholders. The Act’s application processes for licences and permits go further: they require that a project proponent engage with the public and provide an overview of the comments and concerns the public expressed, the responses the proponent provided and a description of all steps the proponent took or proposes to take to address any concerns raised. The Act’s reference to “public” engagement appears broad, creating a potential area of uncertainty for project developers.
- Public Notice. The N.S. Department of Energy will publicly identify licence applicants that responded to a call for applications, and demonstration permit applicants must submit with their application a project summary that the Department will make available for a 30-day public comment period. Upon issuance of a licence or permit, the Department’s website will post the identity and address of the licence or permit holder, the geographic area it covers and any performance or other requirements the licensee or permittee must satisfy within a specific time.
- Intergovernmental Consultation. Nova Scotia’s One Window Committee, a collection of provincial and federal departments with an interest in marine renewable energy, will also play a role. The N.S. Department of Energy is authorized to consult with other departments and agencies within both the Provincial and Federal governments about licence or permit applications. If any other government department or agency expresses concerns about an application, the applicant will have an opportunity to respond.
- Other Permits & Approvals. The One Window Committee provides for communication among governmental departments but project proponents still must apply for any other required permits and approvals directly from each provincial or federal department. For example, generators with a production rating of at least 2 MW derived from wind, tides or waves require a provincial Environmental Assessment approval under the Nova Scotia Environment Act. And although the Act regulates projects located in Provincial waters, there can still be requirements imposed by federal legislation. The Federal government recently introduced amendments to various federal acts relevant to marine renewable energy projects in provincial waters, such as the Fisheries Act and the Federal government’s Bill C-69 (which would replace the Canadian Environmental Assessment Act, 2012 with the Impact Assessment Act and rename the Navigation Protection Act as the Canadian Navigable Waters Act).
- Licence & Permit Term. The term of a licence or a (unconnected) permit is 10 years and the Minister can renew it up to a maximum of 10 additional years. Licences and permits can also be “extended”, but it’s unclear for how long. The term of a demonstration permit is five years; it can be renewed for five year terms, but can’t be “extended” and its aggregate term can’t exceed 18 years.
- Security & Insurance. The Minister can require licence and permit holders to provide financial or other security or carry insurance.
- Decommissioning & Site Rehabilitation. Nova Scotian oil and gas projects are, just now, reaching the decommissioning phase of their life-cycle. Recognizing marine renewable energy projects will someday also reach this phase, the Act requires licensees and permittees to provide to, and obtain approval from, the Minister of a decommissioning, abandonment and rehabilitation plan for their project. Proponents can’t even begin construction or installation until the Minister approves this plan and the decommissioning must be completed before the last day of the licence or permit.
- Rents & Fees. Licensees and permittees must pay certain non-refundable rents as specified in the Regulations, though the Minister has the discretion to waive any rent in relation to a licence or a permit within the FORCE MREA. For example, within 60 days after the date the licence or demonstration permit is issued and every January 31 during the term of the licence or demonstration permit, licence holders and demonstration permit holders must pay rent in the amount equal to the greater of either $2,500.00 per MW of installed capacity under the licence or demonstration permit, and $20.00 per hectare in the licence or demonstration permit area.. The Regulations also set out the various fees for applications for licences, permits and other consents and approvals under the Act. For example, the licence application fee is $2,500.00; the demonstration permit application fee is $2,000.00.
- Royalties. The Act allows the Minister to collect royalties from permittees and licensees, but notably the Regulations enacted so far don’t address royalties. It’s unclear whether this will be a feature of early projects under the Act, though the Province might very well wait for the marine renewable energy industry to mature before imposing a royalty regime.
- Record Keeping & Reporting. Licensees and permittees must maintain certain records and those records must be accessible from an office located in the Province for at least five years after the expiration or revocation of the licence or permit. Licensees and demonstration permittees must also report to the Minister twice a year.
- Enforcement. As with most regulatory regimes, the Minister has a broad range of powers to ensure compliance with the regime. These powers include issuing Ministerial Orders, imposing Administrative Monetary Penalties (or “AMPs”, monetary penalties the relevant legislation authorizes the regulator to impose on an infringer without the need to prosecute the infringement in a court) and suspending or revoking a licence or permit. The Act also makes it an offence to contravene it or the Regulations, the terms of a licence or permit or a Ministerial Order.
- Resources. The N.S. Department of Energy’s “Guide to Preparing an Application for Permit under the Marine Renewable-energy Act” provides additional guidance on the application process for permits under the Act. The Department has stated it recognizes this industry is in its early stages and says the Act and its Regulations are meant to be flexible in their application when it comes to concept designs, prototypes, pre-production installations and experimental and demonstration projects. The Department says it therefore encourages project applicants to contact it early in the planning process for further guidance in preparing a submission for formal review.
Please contact your McInnes Cooper lawyer or any member of the Renewable Energy Team @ McInnes Cooper to discuss this topic or any other legal issue.
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