• The Future Energy Policy of Québec: Promoting Energy Efficiency Over Security of Supply?
  • April 30, 2014 | Author: Louis-Nicolas Boulanger
  • Law Firm: McCarthy Tétrault LLP - Montreal Office
  • On July 4, 2013, the Minister of Natural Resources and Wildlife of the Parti Québécois government in office at the time, Ms. Martine Ouellet, gave the following mandate to the Commission sur les enjeux énergétiques (hereinafter, the Commission), co-chaired by Messrs. Roger Lanoue and Normand Mousseau:

    1. Describe the current profile of the energy sector in Québec;
    2. Analyze the issues pertaining thereto;
    3. Conduct a public consultation in all regions of Québec; and
    4. Produce a report including recommendations for the next energy strategy of Québec expected in 2015.

    After visiting 15 regions of Québec, hearing more than 800 people and studying 460 briefs, the Commission produced a report titled “Maîtriser notre avenir énergétique” (“Controlling Our Energy Future”, available in French only) (the Report), which was released by the Minister of Natural Resources and Wildlife on February 24, 2014.

    The Commission mainly recommends that energy control and management be the fundamental principle of the next energy policy of Québec. The Report thus differs from the main objective of the last energy policy of Québec (2006-2015), which was to ensure security of energy supplies for the province.

    We summarize below the principal recommendations of the Commission in respect of the main energy sources in Québec. The Report describes numerous additional recommendations with respect to energy management, including in respect of land use planning, efficiency of buildings, transports (especially in relation to the infrastructures necessary for the circulation of electric vehicles and the electrification of public and individual transport) and the mandate, composition and procedural obligations of the Régie de l’énergie (Québec’s regulatory energy board).

    It will be interesting to review the next energy policy of Québec to ascertain whether it will implement the Report’s recommendations. This review will be particularly interesting as the Liberal Party of Québec recently replaced the Parti Québécois as governing party for the province and a new Minister of Energy and Natural Resources is now in office, Mr. Pierre Arcand.

    Renewable Bioenergy and Heat Recovery

    • Create a substantial residual forest biomass sector in all forest areas of Québec;
    • Stimulate the progressive development of the biofuels industry by imposing a minimum level of biofuels in oil and diesel;
    • Impose a regulatory obligation requiring industries to recover waste heat rejected by industrial or chemical processes and make it available to potential users. The costs of recovery, transport and use are borne by the users;
    • Impose mandatory filings and registrations in a register of the quantity and quality of the waste heat generated by various industries.

    Natural Gas

    • Encourage the replacement of heavy fuel oil and coal by natural gas in all applications where the use of electricity and biomass is not competitive;
    • Support the construction of a gas pipeline connecting the Côte-Nord region to Gaz Métro’s network;
    • Make the necessary representations to the authority responsible for the approval of the TransCanada pipeline project to the effect that if the project is allowed, it should include the cost of building the replacement gas pipeline required to maintain the security of supply of Québec.

    Oil and Other Hydrocarbons in Québec

    • Set a goal of reducing hydrocarbon consumption by 75% by 2050 with an intermediate target of 20% reduction in the consumption of petroleum products by 2025;
    • Maintain the current refining capacity in the province of Québec;
    • Stricter provincial regulation of oil transport by rail while taking into account the federal jurisdiction;
    • Support the reversal of the Enbridge pipeline to the extent that it provides financial compensation and guarantees of safety, information and training of front line staff, with an unlimited liability insurance;
    • Adopt an Hydrocarbons Act with emphasis on the principles of sustainable development and the setting of clear mechanisms for the allocation of licences of operation and exploration, environmental management and income distribution;
    • Consider the creation of a Crown corporation to ensure a majority and public participation in the profits generated by the exploitation of fossil fuels in its territory (in addition to taxes and charges);
    • Adopt a policy for the allocation of exploration or operation licences using an auction mechanism on which the government would retain control (Ø free mining).

    Electricity

    While electricity demand is stable, the Commission reminds us that Québec has produced an annual 30 TWh of excess electricity in 2012. The Commission further submits that Hydro-Québec must pay energy from new sources of production since 2008 between ¢6/kWh and ¢12/kWh and then sell it for about ¢3/kWh in the US northeast market. These factors explain the following recommendations of the Report in relation to electricity:

    • Analyze without delay the suspension of investments in the Romaine-3 and Romaine-4 hydroelectric development;
    • Stop or suspend supply contracts in wind, cogeneration and small hydropower for the facilities that are not yet built;
    • Ensure that any new supply procured by Hydro-Québec Production or Hydro-Québec Distribution is contracted based on the average price of energy exports in off-peak period of the previous year (this recommendation targets, among other, the block of 800 MW of wind announced in spring 2013 and the possible renewal of APR91 contracts);
    • Negotiate the terms of supply of electricity to aluminum smelters in Québec (already installed), taking into account the capacity of Hydro-Québec, Québec’s public finances, the economic impacts and the global energy landscape;
    • Offer to energy-intensive industries interested in locating in Québec a consumer price discount on the normal price of electricity for a short term period (three to eight years).

    In summary, according to the Commission, Québec’s energy future will focus on a better use of its existing resources, rather than developing new ones. The exploration and exploitation of oil and gas in Québec should be areas to watch, especially with the advent of a new possible statute pertaining thereto. The Commission also questions the purchase by Hydro-Québec of new electricity supplies from wind power and hydropower. We will keep you informed of future developments in this area.