New Monitoring System For Oil Sands Introduced
By: Garth Parker, Lisa Jamieson and Nadia Conforti

On February 3, 2012, the Federal and Alberta governments introduced the Joint Canada-Alberta Implementation Plan for Oil Sands Monitoring, a three-year implementation plan to enhance environmental monitoring of air, water, land, and biodiversity in the oil sands.

Due to be completed in 2015, the implementation plan includes expansion of the current number and locations of monitoring sites, increased sampling frequency and parameters, and implementation of new sensing tools and methods.  Monitoring will focus on collecting data from the following components:  air quality, water quantity and quality, levels of acidity in sensitive lakes, aquatic ecosystem health, wildlife toxicology, and terrestrial biodiversity and habitat disturbance.

The phased implementation of the monitoring program will be jointly managed by both governments with public annual progress reports prepared for the first three years and, following year three, external expert peer reviews at five-year intervals.  As well, the monitoring program will undergo internal reviews of the scope, operations and cost of the program.

In addition to increased monitoring efforts, the implementation plan includes the development of a data management system which will make the methodology and collected data publicly available in a standardized coordinated manner.  This will encourage and enable concerned parties to conduct independent assessment and evaluations.

During the first three years, the total cost of the enhanced monitoring will be up to $50 million per year on top of the current resources contributed to environmental monitoring.  The implementation plan indicates that funding for the monitoring program will come primarily from industry.  Moving forward, both governments will be working with oil sands industry to develop a sustainable, ongoing funding arrangement to support the monitoring program.

The new program will consolidate and integrate the oils sands monitoring activities presently managed by independent organizations and resolves the current challenges created by multiple independent monitoring programs.

Furthermore, data from the expanded monitoring will be used to improve understanding of the current status and on-going state of the environment as well as the factors contributing to the environmental impacts in the oil sands area.  This approach to environmental monitoring will be useful as a tool to assess the efficacy of mitigation efforts and may be a key component for decision-makers and stakeholders to advance sustainable management of resource development in Alberta while balancing environmental interests and commitments.

For more information, the readers should contact Garth Parker or Lisa Jamieson.

Ontario Clarifies Property Tax Rules for Renewables
By: Thomas J. Timmins, David Tang and Neeta Sahadev

On January 4, 2012, the Province of Ontario added greater clarity to the property tax treatment of renewable energy generation facilities by amending Ontario Regulation 282/98 under Ontario’s Primary Property tax statute, the Assessment Act.

The objective of the amendments made to Regulation 282/98, which take effect retroactively as of January 1, 2011, were to clarify the property tax treatment of renewable energy installations for property owners, project developers, municipalities and the Municipal Property Assessment Corporation in addition to ensuring that property tax does not act as a disincentive to renewable energy generation, particularly in situations where small-scale generation facilities are owned by persons who are not normally in the business of generation.

For a number of years, the property tax treatment of renewable energy installations has been a matter of some uncertainty in Ontario. Unlike wind energy, where $40,000 of value is attributed to a property for each installed mega-watt of capacity, solar energy developments and biogas developments previously lacked clear assessment rules. 

In understanding the changes it is useful to remember that property taxes are based on at least two separate elements:  the assessment value and the tax classification (which determine the tax rate).

Rooftop Installations

Rooftop renewable energy installations will not result in a change in the assessment if they are ancillary to the original building and its use – this is very good news for property owners and for project developers who have agreed to bear the burden of property tax increases attributed to rooftop solar installations.  

As will always be the case, the issue of whether the installation is ancillary will depend on the factual situation but we expect that the scale or size of the installation in relationship to the existing building and its operations and possibly the amount of revenue it generates compared to the revenue the underlying facility will be of importance. In situations where the economic value or productivity of the existing facility is marginal, particular care should be taken with the legal structure of the arrangement (lease, joint-venture, etc.) to ensure the installation is not unexpectedly assessed with additional value or causes a change in the tax classification.

We would suggest that the regulation’s different treatment of ancillary rooftop installations compared to ground-mounted installations should result in only exceptional situations being considered for tax class change or increases in value.

Overall, most rooftop installations will be fairly clear-cut and the regulation’s changes represents a significant clarification. 

Ground-mounted Installations

The value for assessment purposes for ground installations will depend on the size and location of the facility. It will also depend on the entity involved in the electricity generation, as described below: 

1. The Ancillary Activity/Non-Commercial Carve-out: In instances where the landowner’s primary business is not electricity generation or transmission or it meets certain farming business requirements, there are now three rules outlined by the regulations:
   
   
1. Small-size ground installations, up to 10kW, will not see an increase in assessed value or a change in the tax classification/rate.
   
   
2. Medium-size ground installations, over 10 kW and up to 500 kW, the tax class/rate will not be changed but will be based on the original surrounding land use, whether that be residential, commercial or farm, etc. The value of the land can be increased however.
   
   
3. Large-size ground installations with a generation capacity over 500 kW will be reclassified in part to the industrial tax class/rate. The lands will remain in the original tax class to the percentage that 500 kW bears to the total generation capacity. Similarly to medium-size installations, the assessed value of the land can be increased. Depending on the original classification, the change in taxes levied can be very large.
   
   
2. Business Scale Solar Facilities: Consistent with current treatment, ground-mounted solar generation facilities that are operated by entities whose primary business is the generation, transmission or distribution of electricity, will be taxed at the industrial rate.
   
   
3. Anaerobic Digestion: Farmers that operate anaerobic digestion facilities of any size on a farm will be taxed at the farm rate.
   
   
4. Wind Turbine Towers: Consistent with current treatment, wind turbine towers will be assessed at a rate of $40,000 per MW of installed capacity with the exception of rooftop and ground-based installations of up to 10 kW where the property tax assessment is unaffected.

We anticipate further clarification of the taxation rates for renewable energy installations as all uncertainty regarding the property tax impacts of a renewable energy installation is not removed by the regulatory amendments. 

For instance, there will continue to be some situations where it is unclear how the test as to whether power generation is “ancilliary” to the main activity on the property will be implemented or applied. Further, if there is a change in the classification of the property, the impact of this change will need to be considered. Finally, the manner in which the value will be increased and whether that is based upon the costs of the installation, the value to the landowner in terms of income from rent or a sharing of income from the electricity generated will almost certainly be an important consideration and possible conflict with the Municipal Property Assessment Corporation. 

With more complex arrangements and larger installations, project-specific attention still needs to be given to what the property tax implications of the amendments will be and careful structuring of the arrangement between the parties may be useful to minimize property tax consequences. It is also important to recognize that a landowner or an electricity generator’s right to appeal a change in the assessment is time-limited and should be secured by contract and made on time as failure to meet the short appeal deadlines is usually permanently fatal.

Gowlings is in your corner

Gowlings is a full service national law firm with expertise in all aspects of solar energy projects, including tax efficient investment structures, to assist stakeholders in developing innovative and forward-looking solutions in developing solar energy projects.