Green Energy Act Lawsuits / Minister plans to tweak Long-Term Energy Plan

Green Energy Act Lawsuits 

Minister plans to tweak Long-Term Energy Plan.

Over the past days, weeks, months and years much has been written about the Green Energy and Green Economy Act (Act) and how it has driven up Ontario’s cost of electricity, caused property values to fall, created health problems and also destroyed nature. The evidence has continued to mount that the Act has also created dissension in rural communities and caused neighbours to sue neighbours for leasing land to wind developers.

While those “neighbour against neighbour” lawsuits work their way through our judicial system, lurking in the background are other actions that potentially make the “gas plant” moves look cheap. The Province is being sued on several fronts as is the Federal Government! The latter is being sued under the North American Free Trade Agreement (NAFTA) due to provisions in the Act related to the requirement for local content, whereas the Province is being sued through the Provincial Courts for actions caused by their offshore wind “moratorium” and their rejigging of onshore contracts.

The largest lawsuit ($2.25 billion) against the Province was brought by Trillium Wind Power in respect to an offshore wind development for which it didn’t even have a contract with the Ontario Power Authority (OPA) but held a, “Applicant of Record” letter from the Ministry of Natural Resources (MNR). While an Ontario Court has struck down that lawsuit the company is reportedly appealing it.

In an article in the Toronto Star on February 15, 2013 the issue of the, on again, off again, moratorium on wind development in the Great Lakes is explored and it would appear that no early resolution is in sight on whether the moratorium will or will not be lifted. Studies completed by the MNR on offshore wind are not conclusive! As has been the case for the Liberals planning since first elected; they announce their policy and wait for the fallout! Logic suggests studies should be completed before a policy is developed but that appears to run counter to Liberal strategy.

Another lawsuit comes from Mesa Power Group LLC, on a NAFTA action which reportedly seeks $775 million. Mesa is T. Boone Picken’s renewable energy group which had three projects high on the list of future contracts before the OPA rejigged it. Picken’s Mesa rushed to Ontario with his “GE” pre-ordered turbines, perhaps hoping to unload them after he shelved his big Texas wind development. He used Leader Resources of Kincardine, Ontario, as his Canadian arm (American Wind Alliance) to gain traction under the GEA. Mesa’s action claims favourtism was granted to Samsung under the contract that George Smitherman, former Minister of Energy, reputedly negotiated. How this one will play out is an unknown but it is before the United Nations Commission on International Trade Law (UNCITRAL) and Canada is required to defend this action on behalf of the Province.

Have those lawsuits and NAFTA challenges resulted in the need to rework the Long-Term Energy Plan?  Robert Hornung, President of CanWEA (Canadian Wind Energy Association) would appear to think so and was reported (TorStar article) as saying: “the province is reviewing (writer’s emphasis) its long term energy plan this year, and hopes off-shore wind farms can be part of the review.”

A contact with Energy Minister Bob Chiarelli’s office about a month after the Hornung quote however got this response from an Energy Ministry spokesperson;

“You noted in your email that Mr. Hornung of CanWEA indicated in a newspaper article that “the province is reviewing its long term energy plan this year”. At this point the Ministry of Energy has not indicated to the public any intent to undertake a review of the Long Term Energy Plan.” 

Following this e-mail, Minister Chiarelli was on CFRA radio (Ottawa) April 11th and during the interview he made the statement that the “Long Term Energy Plan” will be reviewed this year. Again, on April 16, 2013 Minister Chiarelli at the “Power Conference” in Toronto, was the keynote speaker, and repeated that the Long Term Energy Plan; prepared by the Ministry of Energy; when Brad Duguid held the Minister’s position; was going to be reviewed.  It makes one wonder who’s in charge of the electricity sector—the Minister or CanWEA!

While details on the above legal actions can be found though an internet search, the best information available is in respect to Windstream Energy LLC who actually had a contract from the OPA to erect a 300 MW project in Lake Ontario called; Windstream Wolfe Island Shoals Inc. (WWIS). The moratorium on offshore wind scuttled those plans for Windstream and the result is their action filed under Articles 1116, 1117 and 1120 of NAFTA.  The arbitration filing (late January, 2013) with the Government of Canada; by Windstream’s counsel contains information related to the WWIS project that reflects on; how the project came about, who is behind it, the anticipated revenue stream, etc. The filing contains history surrounding the creation of the Act and bits of press releases and quotations that dominated Queen’s Park hyperbola at that time. Here is a taste of what is found in the filing:

“Government of Ontario representatives stated repeatedly that a primary purpose of the Green Energy Act was to create certainty for investors to invest in renewable power in Ontario and thereby create jobs — more than 50,000 new jobs between 2009 and 2012. Ontario’s Minister of Energy and Infrastructure George Smitherman, speaking on February 20, 2009 to the Toronto Board of Trade, stated that the Green Energy Act,
… will make the province the destination of choice for green power developers, and incent proponents large and small to develop projects by offering an attractive price for renewable energy AND the certainty that creates an attractive investment climate.

Certainty that we will purchase the power at a fair price.
Certainty that we will get the power connected to the grid.
Certainty that government will issue permits in a timely way.”

In this document you discover that the party (Ian Baines) responsible for bringing us the TransAlta Wolfe Island wind development “leads the activities of Windstream and its investments in Ontario,”. The Wolfe Island wind development with 197.6 MW of nameplate capacity has the reputation of having the 2nd highest kill rate of birds and bats (per MW of installed capacity) in North America but recent testimony by a qualified ornithology expert at the Environmental Review Tribunal on Ostrander Point ranks it higher. The testimony heard by the ERT was that “had the carcass search area for Wolfe Island been the same as the wind development with the # 1 ranking Wolfe Island would have surpassed it by a considerable margin.”

Now that is some testimonial both to Mr. Baines and the Act!

Further on in the NAFTA filed document, the authors claim that the WWIS project would have generated “approximately CDN $5.1 billion in revenue.” over the 20 year FIT Contract Period ($255 million per annum). When the OPA signed the contract the FIT rate for off shore wind was $190 per megawatt hour (MWh), inferring the 300 MW of nameplate capacity was expected to generate 1,342,000 MWh. Now if you calculate what 300 MW would produce at say, 100% of capacity the result would be about 2.6 million MWh so the claim proposes that this wind development would have consistently produced at the rate of about 51% of its capacity. It would appear that Mr. Baines was shooting for another record but the document notes that proper “wind testing” was never carried out so the 51% (of capacity) required to produce the $5.1 billion dollars in revenue was never verified or may not be even close to actual output if erected. It is also not clear that there is any built in allowance for maintenance, and the penchant of wind turbines to age quicker then claimed.

The damage claim against the taxpayers of Canada submitted by the Bay Street law firm are for; “at least CDN$475,230,000, including for lost profits and other damages incurred as a result of the moratorium and related measures”.  While the document claims the investment that was to be made was $1.5 billion it is not clear how much Windstream had incurred by way of sunk costs and it will be interesting to see if the UNCITRAL arbitration goes all the way to covering those “lost profits” but as a Canadian taxpayer one would hope it turns out to be a fraction of their claim.

So in summary; those three (3) law suits alone total $3.5 billion dollars or about three times the estimated cost of the gas plant moves.

No matter what the settlement by the Province or the Federal government for any or all of these lawsuits we should expect a press release from the Ontario Ministry of Energy’s office (assuming the Liberals remain in power) saying something akin to; “it will only cost the ______ (fill in blank with ratepayer or taxpayer) of Ontario____ (fill in blank) millions to settle”.  Those settlement amounts will be added to our electricity bills or our Provincial debt (or our Federal debt) and the value to the ratepayer/taxpayers will be nothing.

In the event Minister Chiarelli tweaks the FIT program to allow offshore wind it will perhaps make one of those NAFTA lawsuits disappear however the effect will be to increase electricity prices on the backs of all of Ontario’s ratepayers to satisfy the frivolous Liberal concepts of how Ontarians should generate and pay for electricity.

Even if all of the lawsuits disappear, history will confirm it was simply another part of the boondoggle on the Ontario taxpayers or ratepayers the Liberal Energy portfolio achieved!

Parker Gallant
April 26, 2013

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