Rhino's Ramblings - The Politics of Power

By Robert Thomas Opinion/Commentary

It came as a bit of a shock for not only SaskPower but the City of Moose Jaw as new federal regulations threaten the construction of a proposed natural gas fired power plant in the South East Industrial Park.

The proposed plant, with an estimated cost of $700 million, was expected to create 600 jobs during its construction and 25 high paying jobs once it became operational.

If built, the economic impact locally - especially during construction - would be more massive than solar or wind.

It was seen as a Christmas gift to the City of Moose Jaw when a Memorandum of Understanding was signed which would see SaskPower pay $614,992 for 110 acres directly north of the Sewage Treatment Plant.

Chinook Power Station near Swift Current under construction - SaskPower Photo

So what are these new federal regulations and how does it threaten the proposed Moose Jaw plant?

Quite simply the federal government wants to subject all new power plants to the federal Carbon Tax as part of its climate change strategy. The hope is by making plants subject to the full Carbon Tax it will force utilities, like SaskPower, to move towards renewable power sources like wind and solar.

The federal Carbon Tax was imposed on provinces which do not have their own carbon tax schemes which includes Saskatchewan.

With the implementation of their carbon tax the federal government created what is essentially a large (big) emitter class which applies to SaskPower.

The large industrial emitter class applies to emitters of Greenhouse Gases (GHG) or carbon dioxide of more than 50,000 tonnes or the equivalent of 10,000 cars emissions.

It set a ceiling on emissions by big industrial emitters for every industry and anything above that ceiling the industry would have to pay.

The exemptions were instituted as part of a two-fold policy.

The first was to create an environment where Canadian large emitter industries could remain relatively competitive without simply closing their Canadian operations and moving to other jurisdictions which had lower – but much more likely – or no carbon tax.

The big industrial emitters exemptions were designed to prevent this predictable flight of capital and jobs due to the implementation of the federal Carbon Tax.

Jurisdictions which under such treaties as the Paris Climate Accord – a UN initiative to keep global temperature increases below 2 C of their pre-industrialized levels - are considered developing industrial economies and allowed to increase their greenhouse gas emissions whereas Canada by being a developed industrialized nation must make reductions.

Canada itself has committed to a reduction in GHG to 30 percent lower than their 2005 levels.

The second was also to create an economic environment whereby large industrial emitters would move towards technology to reduce or even eliminate their GHG emissions.

Initially the large or big emitter program provided a way out for SaskPower to reduce the cost of the federal Carbon Tax and continue to use fossil fuels. The exemption would apply to natural gas fired power plants such as the one proposed for Moose Jaw.

The proposed Moose Jaw plant, like it’s sister plant just being completed near Swift Current, use a technology called combined cycle. Combined cycle is a technology which re-captures waste heat and generates more electricity and is listed as 50 percent more efficient than a single cycle generating station where the waste heat simply goes up the chimney.

Status Update provided to Moose Jaw and District Chamber of Commerce members

Think of it as the old low efficiency natural gas furnaces in your home (single cycle) versus today’s high efficiency natural gas furnaces (combined cycle).

By being so efficient the plants in Swift Current and the proposed one in Moose Jaw would not be paying the federal Carbon Tax as they would both be under the emission standards set by the large or big emitter program.

This left the federal government in a major quandary and that is how do you convince SaskPower and other electrical producers to move to electrical generation based upon generation models which produce no greenhouse gases? How do you use the stick so to speak to force SaskPower to move towards other power generation models such as solar, wind, geo thermal or nuclear when the carrot is failing?

They are questions which irked bureaucrats in the federal department of Environment and Climate Change Canada so much they managed to get a rule change.

The rule change was all natural gas plants operational after 2021 will have to pay the federal Carbon Tax on the higher portion of their greenhouse gas emissions until 2030 when they pay the full Carbon tax price of all emissions.

As it is set right now the federal Carbon Tax is $20 per tonne racheting up by $10 per tonne annually until it reaches $50 per tonne in 2022.

The problem is though if you take a good look at the targets Canada is committed to and a report by the Parliamentary Budget Officer (PBO) to meet the targets the federal Carbon Tax is going to have to ramp itself up even higher.

In a June 2019 report the PBO wrote the federal Carbon Tax scheme needs to increase past the 2022 level of $50 per tonne if Canada is going to achieve a reduction of present levels of 732 megatonnes to 513 megatonnes by 2030.

In fact the present restrictive $50 per tonne federal Carbon Tax needs to be more broadly based and continue to rachet itself up by $6 per tonne in 2023 and rising to $52 per tonne by 2030 to meet the targets Canada has set to reach under the aforementioned Paris Climate Accord.

If the increase to $102 per tonne is not implemented by 2030 the PBO predicts Canada will only reach reductions of 592 megatonnes of GHG emissions or 79 megatonnes short of the target necessary to comply with the Paris Climate Accord.

For both you and I as consumers it would mean 23 cents per litre increase in gasoline prices by 2030.

This is where it gets scary for SaskPower and the proposed natural gas fired electrical plant for Moose Jaw.

With the plant subject to the full federal Carbon Tax in 2030 what will the actual tax be?

Will it be $50 per tonne the federal government is promising or will it be the broader based and higher $102 per tonne the PBO has called for?

It has led to the Province not believing the assurances of the Federal Government that $50 per tonne is the limit especially after the Province was broadsided by new regulations involving the exemption for natural gas fired generating stations. Regulations, which despite being downplayed to some extent, in my opinion gravely threaten the proposed plant in Moose Jaw.

This is evident by the Status Update of the proposed plant to Moose Jaw and District Chamber of Commerce members where SaskPower is taking a wait and see approach.

Sure the Crown utility is analyzing but they are in reality waiting on two things.

Will the appeal of the constitutionality of a federally imposed Carbon Tax be successful in the Supreme Court of Canada and/or will the federal government change in October with a Conservative win and Andrew Scheer's promise to scrap the Carbon Tax altogether?

It is a wait and see approach that makes the federal Carbon Tax a likely major issue come this October in a city notorious for large economic partners bolting after slipping on the promise ring.