This is an update to our previous blog, Regulatory Considerations for Renewable Natural Gas Projects in Alberta, published on July 21, 2022.
A key component to the success of any RNG project is ensuring there is a regulatory plan established at the outset.
While Alberta does not currently have a legislative framework that is specific to RNG projects, the relevant requirements of the applicable legislation for industrial facilities, environmental assessments and water use will apply to RNG projects. In particular, as RNG projects are highly integrated, using methane captured from agricultural and food waste digester, wastewater treatment facilities or landfill sites, any one of these components may trigger the need for regulatory approvals and compliance with other regulatory procedures. An understanding of the regulatory regime that applies to each of these components is critical in the development of a comprehensive regulatory plan for your RNG project.
In Alberta, project owners must seek necessary approvals from Alberta Environment and Protected Areas (AEP) under the provincial Environmental Protection and Enhancement Act (EPEA). The EPEA sets out different types of regulatory requirements, and under Part 3 of the EPEA, all activities listed under the Activities Designation Regulation (ADR) are subject to a notice, registration or an approval, depending on which schedule the activity falls under.
A RNG project may require various authorizations under EPEA. Where RNG projects have multiple components, project owners should be aware that each of the components may have differing approval, registration or notification requirements. Schedule 1 of the ADR lists activities where approval from AEP is mandatory. An approval is reserved for activities that are most likely to have a significant impact on the environment. Although Schedule 1 does not explicitly list RNG projects, it includes large-scale waste management plants such as large-scale landfills, wastewater treatment plants and power plants. Schedule 2 includes small-scale waste management facilities and only requires registration with AEP as distinct from an approval, and in turn, under Schedule 3, the project only requires notification to AEP. Activities requiring notification under Schedule 3 include, among others, waste management facilities that decompose vegetative matter or manure through a controlled bio‑oxidation process.
The EPEA requires an Environmental Impact Assessment (EIA) for mandatory activities listed under Schedule 1 of the Environmental Assessment (Mandatory and Exempted Activities) Regulation. As noted above, RNG projects are not expressly listed as mandatory activities requiring an EIA, however, integrated RNG projects may have components that fall under the mandatory activities. Even when RNG projects do not have components that require an EIA, AEP has the discretion to require that one be completed.
The development of RNG projects may involve additional project-specific regulatory exemptions or requirements. While a specific proposal must be assessed on its facts, a project developer may be exempt from some or all requirements to obtain certain regulatory approvals having regard to factors such as whether a project will (1) use existing manure storage from a developer's own livestock to make biogas for its sole consumption; (2) sell generated electricity to the grid; and (3) modify existing manure storage or require the construction of new manure storage.
Additional considerations when developing RNG projects include the following:
There are a number of key policy and regulatory developments that may impact RNG project economics in Alberta.
The Canadian government released its long-anticipated draft Clean Electricity Regulations (Regulations) on August 10, 2023,1 setting out its approach to mandating a net-zero emissions power grid by 2035. The Regulations establish emission intensity limits for electricity generators that would require significant investments to achieve its objectives. As discussed in our previous blog, Federal Government Asserts Jurisdiction over Electricity in New Draft Regulations, for renewable power proponents and those of complementary technologies (such as energy storage), the Regulations, paired with the myriad federal investment tax credits, signal strong federal support and a favourable regulatory environment for growth in the sector.
Developers should also be aware that there is likely to be a significant shift on how transmission costs are currently allocated and collected from customers, potentially resulting in impacts to industrial consumers and implications for RNG project economics in Alberta. The AUC denied an application by the Independent System Operator (ISO or AESO) to amend its Bulk and Regional Rate Design for transmission costs on November 10, 2022. In the decision denying the application, the AUC directed the AESO to develop a new rate design that avoids using the currently approved 12 coincident peak methodology which the AUC found primarily allows for the avoidance of payment for the sunk costs of the transmission system. Instead, the AUC found that the rate design should, to degree possible, recover costs in a manner that minimizes price signals that discourage incremental use of surplus off-peak system capacity.2 The AESO's development of the new rate design remains ongoing and must be filed with the AUC by January 31, 2025.
Additionally, Bill 22, the Electricity Statutes (Modernizing Alberta’s Electricity Grid) Amendment Act, 2022, SA 2022 c 8, received royal assent on May 31, 2022. The individual sections amending the Alberta Utilities Commission Act, Electric Utilities Act and Hydro and Electric Energy Act each come into force on proclamation. The government intends to proclaim Bill 22 into force concurrently with the associated regulations. Among other things, Bill 22 introduces amendments intended to permit electricity generators to engage in self-supply and export of excess electricity to the grid, which is restricted under current legislation. Bill 22 also amends section 122 of the Electric Utilities Act to expressly state that the ISO tariff can recover the just and reasonable transmission system costs from grid-connected self-suppliers (except in respect of electricity consumed by customers who are industrial systems). While the government has signaled its intention to proclaim Bill 22 in the coming months, projects that intend to self-supply and export electricity from the grid will continue to face significant project development barriers unless and until the proclamation of Bill 22 occurs.
2 AUC Decision 26911-D01-2022.