Ontario Ministry of Natural Resources Subject Waterpower New Site Release and Development Review Compiled by Lands and Waters Section Water Resources Policy Draft-March 28, 2004 Date Issued New Replaces Directive Title Water Power Program Guidelines (1990) Number Dated 1 1.0 DEFINITIONS Applicant of Record: The Applicant of Record will be defined as the individual/company/community that is under consideration for site release. While there is an Applicant of Record associated with a potential site, MNR will not receive or accept applications for the same location. A proponent can only be identified as the Applicant of Record for 3 greenfield sites at any given time. A proponent will be considered the Applicant of Record from the release of an opportunity until the facility s in-service date. Crown Waterpower Opportunities: There are two types of Crown Waterpower Opportunities: 1) Existing Crown owned structure opportunities; and 2) Greenfield opportunities on Crown land. Greenfield: This term describes new opportunities for waterpower development where there is no existing water control structure. Local Aboriginal Community: This applies to those communities whose traditional territory falls within the tertiary watershed of the potential waterpower development. Riparian Owner: The special property rights of an owner of land adjoining a river (one or both banks), stream or lake respecting the water, whether or not the property owner owns the bed (i.e., the right of access to the water etc). Site: Site is defined as reaches of a river or individual locations for the purposes of this policy. The site will be defined on a case by case basis to allow for local flexibility when considering new site release. Site Release: The release of a site is not a disposition; it is the completion of a process to select an Applicant of Record for potential waterpower development. The Applicant of Record will be offered the opportunity to apply for the necessary approvals to construct and operate a waterpower facility. There is no tenure or rights associated with this opportunity.
2 of 13 2.0 INTRODUCTION Waterpower has been developed in the province for over three centuries. The first developments were used for mechanical power in grist and lumber mills. It was not until the late 1800 s that hydroelectric (waterpower) developments were undertaken. By 1906, the Hydro-Electric Power Commission of Ontario (Ontario Hydro) had been established, and over the next nine decades, this Crown corporation played a dominant role in the development of the province s electricity generation and transmission grid, including its waterpower resources. The bulk of the province s current installed capacity was in service by the mid-1970s. In 1982, to encourage new private sector investment in waterpower, the Ministry of Natural Resources (MNR) and the Ministry of Energy adopted a policy on the release and development of small hydro sites (those up to 2 MW), with Ontario Hydro retaining a first right of refusal on larger sites. Between 1982 and 1986 the Ministry of Energy funded 15 demonstration sites, most were located in Southern Ontario. In 1986, Ontario Hydro adopted a policy of purchasing power from small private generators known as Non-Utility Generators or NUGs. To support this initiative MNR revised its waterpower policy to increase Ontario Hydro s first right of refusal threshold from 2MW to 20MW. Ontario Hydro provided a public policy role in assessing the needs and demands for future electricity in the province of Ontario. This was done through electricity demand/supply assessments, which estimated the future need for power in the Province, laid out the plans for acquiring future sources of power (Nuclear, Coal, Waterpower etc.) and identified the necessary transmission expansions and upgrades to deliver the future power to market. Historically the MNR did not have a role in identifying potential opportunities or proactively releasing these opportunities to the private sector. MNR would approve small waterpower opportunities (in consultation with Ontario Hydro) to NUGs. These generators included generation for industrial purposes, such as mills or mines, or where the potential producer had a power purchase agreement with Ontario Hydro. These opportunities were released on a first come, first serve basis. Ontario Hydro maintained a significant role in reviewing these applications to ensure the developments would compliment other proposed development opportunities. As part of the break up of Ontario Hydro into 5 separate corporations; Ontario Power Generation being the successor generating company, and Hydro One the successor electricity transmission company and the opening of the electricity sector to competition in May 2002, MNR took a lead public policy role in the identification and release of new waterpower opportunities. In Ontario, the potential to generate new electricity from waterpower arises from several sources: 1) Redevelopment of existing structures: This describes redevelopment and upgrades (such as efficiency improvements, turbine upgrades) to existing waterpower facilities; 2) Greenfield Opportunities: This describes new opportunities for waterpower development where there is no existing structure; and
3 of 13 3) Existing Structure Opportunities: This describes the redevelopment of water control structures, such as MNR and Conservation Authority dams, to produce waterpower. The MNR supports the development of new waterpower energy through the disposition of: 1) Existing Crown owned structure opportunities (MNR can make existing Crown infrastructure available through existing review and release processes for the devolvement of MNR facilities); and 2) Greenfield opportunities on Crown land. In 1985 the MNR and Ontario Hydro, in cooperation with the Ministry of Energy, undertook to update the inventory of hydrological potential for waterpower in the Province of Ontario (study was originally commission in 1925, with subsequent updates in 1931 and 1946). Starting with this inventory and using additional information from Natural Resources Canada, historic documentation (i.e. Ontario Hydro Demand/Supply Plan, 1992); information on existing Crownowned structures and current land use direction MNR has developed an Inventory of Potential Waterpower Opportunities on Crown land. This inventory represents areas in the province where there may be some hydrological potential to produce waterpower. Although the inventory should not be interpreted as areas within the province where waterpower will be developed, it does provide useful information on waterpower resources. A map product illustrating this inventory will be made available to interested parties when the final policy is posted on the Environmental Bill of Rights registry. Waterpower development usually involves Crown land under the administration and control of the MNR. The disposition and development of potential waterpower sites is governed by the Lakes and Rivers Improvement Act and the Public Lands Act. Various other statutes and regulations administered by provincial and federal agencies also govern waterpower development such as the Ontario Environmental Assessment Act and the federal Fisheries Act. In cases involving Crown land, the final decision concerning the disposition and development strategy for potential waterpower sites will be made by the MNR. 3.0 PROGRAM DIRECTION 3.1 Application This policy Waterpower New Site Release and Development Review will apply to: the release of greenfield Crown waterpower opportunities, as outlined in sections 4.1, and the development, redevelopment or upgrade of existing waterpower facilities on Crown or private land, as discussed in section 4.2. This policy does not apply to: Waterpower development within the Moose River Basin, North of Highway 11. The development of these sites may be negotiated at a later date;
4 of 13 The release of Crown owned infrastructure, these opportunities will be made available through existing review and release processes for the devolvement of MNR facilities; or Federal lands. At this time, individual developments greater than 25 MW will not be considered within the basins of the Severn, Winisk, Attawpiskat and Albany Rivers. 3.2 Statement of Environmental Values The MNR is responsible for managing Ontario s natural resources on Crown land in accordance with the statutes it administers. As the provincial lead conservation agency, the Ministry is the steward of provincial parks, natural heritage areas, forests, fisheries, wildlife, aggregates, fuel minerals and Crown lands and waters that make up 87% of Ontario. In 1994 the Ministry finalized its Statement of Environmental Values (SEV) under the Environmental Bill of Rights (EBR). The SEV is a document that describes how the purposes of the EBR are to be considered whenever decisions that might significantly affect the environment are made in the Ministry. During the development of the Waterpower New Site Release and Development Review Policy, the Ministry has considered its SEV. This document is intended to reflect the direction set out in the SEV and to further the objectives of managing our resources on a sustainable basis. 3.3 Guiding Principles As identified in Land Management policy PL 4.02.01, when disposing of rights to use Crown land (e.g., land use permits or licence of occupation), or interests in Crown lands (e.g. easement, Crown lease, or sale), MNR will: Consult with aboriginal communities where a disposition will result in the infringement of an existing aboriginal or treaty right, or where a disposition involves lands that are subject to an aboriginal land claim; Meet its requirements under the Environmental Assessment Act; and Integrate consideration of the purposes of the Environmental Bill of Rights with social, economic and scientific considerations when making decisions that might significantly affect the environment. Further, in 1996 the government released The Aboriginal Policy Framework: Supporting Aboriginal self-reliance through Economic Development. This policy framework identifies that Crown land and natural resources can provide a basis for Aboriginal economic development. To support the policy framework, the government created a working partnership program that focuses on promoting economic partnerships between Aboriginal communities and the business and corporate sector. This policy reflects MNR s commitment to the Aboriginal Policy Framework and the working partnership program. This policy clearly supports and encourages
5 of 13 aboriginal proponents and their partners through the evaluation process. 3.4 Goal To contribute to the environmental, social and economic well being of the people of Ontario through the provision of opportunities for waterpower development and the sustainable development of Ontario s Crown land. 4.0 POLICY COMPONENTS This policy addresses four distinct components: 1) Site Release-as described in Section 4.1 of this policy directive. 2) Development Review- this applies to private and Crown lands, as described in Section 4.2 of this policy directive. 3) Tenure as described in Section 4.3; and 4) Rental Rates and Taxes as described in Section 4.4. A series of procedural directives will provide detailed direction in support of this policy. 4.1 New Site Release Greenfield Crown waterpower opportunities, will be released through one of two processes. 1) A Competitive Site Release Process, or 2) A Direct Site Release Process. Figure One illustrates the two site release processes. 4.1.1 Competitive Site Release Process The MNR will release Crown Waterpower Opportunities for waterpower > 1 MW through a proponent driven, controlled competitive process. All Crown greenfield opportunities for waterpower, with the exceptions noted in section 4.1.2, will be released through the Competitive Site Release Process, as outlined in Figure One. On an annual basis the MNR main office will issue a call for Expressions of Interest (EOI) on waterpower sites for potential release through the Competitive Site Release Process. Applicants will submit a complete EOI Application and a $1000 non-refundable application fee. Applications and the fee must be received by the MNR main office and date stamped by 4pm on the final day of the EOI period, which will generally be 60 days. MNR will only accept 3 EOI applications from a single proponent during this process. MNR will post a notice on the MNR website with information on the next/upcoming EOI cycle. Applicants can also obtain information from their local MNR district office. Following the closure of the EOI period MNR will consult with potentially affected aboriginal communities to support preparation of the Competitive Site Release Package (CRP) on potential sites for release. Following this consultation period MNR will prepared and issue the CRP. The
6 of 13 CRP will be made available through local District offices, on the MNR website and through the main office in Peterborough. Applicants must respond with a written submission in the form of a Plan of Development (POD) and a letter of credit within 120 days of the CRP package being issued. The MNR will collect a letter of credit from each applicant in the CRP process; however only the successful applicant s letter of credit will be processed. The fee structure is as follows: <5MW =$2000 5MW to 20MW =$5000 >20 MW =$10 000 MNR will evaluate each POD using a multi-criteria analysis, which will be identified in the CRP package and will include specific scoring for, but may not be limited to: Financial Assurance; Technical expertise and feasibility. Potential proponents will only move on to be evaluated on the following CRP components if they meet the minimum requirements identified within the Financial Assurance and Technical Expertise and Feasibility evaluation. If potential proponents meet these requirements they will then be evaluated under the following criteria: Local Aboriginal Community Participation; General description of Potential Impacts and associated Mitigation strategies; and Consultation, permitting and approvals planning. MNR will demonstrate a preference for projects that benefit local aboriginal communities. To demonstrate this preference MNR will apply greater weighting to the aboriginal participation component of the POD evaluation. At the end of the 120-day CRP period, the MNR will review and evaluate all POD applications. The MNR will select the applicant that scores the highest on the evaluation or recommend to the Regional Director that the site not be released at this time. Should MNR select an applicant, that applicant will now be considered the Applicant of Record. Upon the identification of the Applicant of Record MNR can choose to: 1. release the site to the applicant to pursue development approval, or 2. release the site with conditions where the applicant will have 60 day to address deficiencies in the POD. The release of a site is not a disposition; it is the completion of a process to select an Applicant of Record for potential waterpower development. The Applicant of Record will be offered the opportunity to apply for the necessary approvals to construct and operate a waterpower facility. There is no tenure or rights associated with this opportunity.
7 of 13 Successful proponents are required to complete the Environmental Assessment Act requirements for the proposal prior to any authorizations or approvals being issued. The released opportunity is non-transferable and applies to the Applicant of Record only. Proponents who are released an opportunity through the Competitive Site Release Process with be required to issue a Notice of Commencement under the Ontario Environmental Assessment Act, within 12 months or the opportunity will be withdrawn. Further, proponents will have 2 years to seek location approval under the Lakes and Rivers Improvement Act. The Applicant of Record will have 1 year from the date construction approvals are issued under the Lakes and Rivers Improvement Act and Public Lands Act to initiate construction. The inability to meet these timelines will result in the opportunity being withdrawn. MNR may, under exceptional circumstances, extend these timelines. 4.1.2 Direct Site Release Process Proponents may participate in the Direct Site Release Process if: - The proposed development is < 1MW; - The development is proposed by the riparian owner; or - The proposed development is found within the basins of the Severn, Winisk Attawapiskat, or Albany rivers, and is proposed by a local First Nation community(s) and is < 25 MW. MNR will not consider applications for development within these river basins from proponents other than the local First Nation community and/or their partners. At this time, individual developments greater than 25 MW will not be considered within the basins of the Severn, Winisk, Attawpiskat and Albany Rivers. The Direct Site Release Process will be a proponent driven process. MNR will respond to applications received by the local district offices. An Expression of Interest (EOI) application fee of $1000 must be submitted with any development proposals. Development proposals (<1MW) moving through the Direct Site Release Process will be reviewed to determine if the proposed location could support a larger commercial development and to ensure that the proposal is for < 1 MW. The regional engineering specialist will work with the local district office on this review. Upon receipt of a complete EOI application and the $1000 application fee, the local district office will date stamp and review the application to ensure the site qualifies for the Direct Site Release Process. Applications that the district determines are not eligible for the Direct Site Release Process will be refused by the District Manager and the $1000 application fee will be returned. Applicants may be encouraged to participate in the Competitive Site Release Process if appropriate. A proponent can only be identified as the Applicant of Record for 3 greenfield sites at any given time. A proponent will be considered the Applicant of Record from the release of an opportunity until the facility s in-service date. A potential proponent cannot have more than 3 active files under consideration by the ministry at any given time; including where the proponent is currently an Applicant of Record on a potential site. If the site is eligible for the Direct Site Release Process, the district will review the site to establish if the site is available for waterpower development. The applicant will be considered the Applicant of Record at this time. District staff will review existing Crown land use policy
8 of 13 and other approved planning documents to identify areas where the policies could prohibit waterpower development. Applications for areas where waterpower development is inconsistent with land use policies must be denied. The review will also identify areas where current policies would limit or prohibit the development of infrastructure that may be required for waterpower facilities, e.g., roads or transmission corridors. If the local district office determines that the site is available for potential waterpower development, the applicant will prepare a Plan of Development (POD). Proponents will be required to meet minimum standards related to Financial Assurance and Technical Expertise and Feasibility within the POD before a site will be released. The local district office, with regional office support, will identify potential issues, conflict areas and data and information gaps to support the applicant s POD development. The release of a site is not a disposition; it is the completion of a process to select an applicant of record for potential waterpower development. The applicant of record will be offered the opportunity to apply for the necessary approvals to construct and operate a waterpower facility. There is no tenure or rights associated with this opportunity. The applicant of record will have 180 days to submit a complete POD for review by the local district and regional engineering specialist. Following the MNR review, the District Manager may: 1. release the site to the applicant to pursue development approval, 2. release the site with conditions where the applicant will have 60 days to address deficiencies in the POD, or 3. deny the site release. Successful proponents are required to complete the Environmental Assessment Act requirements for the proposal prior to any authorizations or approvals being issued. The released opportunity is non-transferable and applies to the Applicant of Record only. Proponents who are released an opportunity through the Direct Site Release Process with be required to issue a Notice of Commencement under the Ontario Environmental Assessment Act, within 12 months or the opportunity will be withdrawn. Further, proponents will have 2 years to seek location approval under the Lakes and Rivers Improvement Act. The Applicant of Record will have 1 year from the date construction approvals are issued under the Lakes and Rivers Improvement Act and Public Lands Act to initiate construction. The inability to meet these timelines will result in the opportunity being withdrawn. MNR may, under exceptional circumstances, extend these timelines.
9 of 13 Figure One: Waterpower New Site Release Processes Competitive Site Release Process MNR issues an annual call for Expressions of Interest (EOI)-60 Days. Potential proponents respond with a $1000 application fee. Direct Site Release Process Expression of Interest (EOI) application received by local district office with ($1000) application fee. MNR reviews EOI applications and selects potential sites for l MNR consults with potentially affected aboriginal communities on the potential sites to be released. MNR prepares the Competitive Release Package (CRP) and moves forward selected sites to be released. MNR posts the CRP on the MNR website. Does not qualify for Direct Site Release Process. Applicant must apply to MNR s annual call for Expressions of Interest Refuse application $1000 fee returned Site is not available- deny application Qualifies for the Direct Site Release Process District reviews site and determines if the area is available for potential waterpower development Applicant of Record directed to prepare a Plan of Development within 180 days. Applicants prepare a Plan of Development (POD) to respond to the CRP within 120 days, with a letter of credit. District and Region review POD MNR evaluates the applications using the established criteria and rejects all applicants or selects an Applicant of Record. Release Release with conditions Reject Release Release with conditions Reject MNR releases opportunity to the identified Applicant of Record. Applicant of Record pursues development authorizations including the Ontario Environmental Assessment Act.
10 of 13 4.2 Development Review A further component of the Waterpower New Site Release and Development Review policy involves the co-ordination of information needs for the approval and construction of a waterpower project. Proponents moving through the Direct Site Release Process or the Competitive Site Release Process will be subject to the same environmental review and approvals including the Ontario Environmental Assessment Act, the Canadian Environmental Assessment Act, Lakes and Rivers Improvement Act, Public Lands Act, Fisheries Act etc. The Ministry of Natural Resources will strive to co-ordinate all information needs into one streamlined process. All waterpower facilities under provincial jurisdiction will be required to prepare a Water Management Plan in accordance with the approved Water Management Planning Guidelines for Waterpower. Further, in some instances the development of a new site or redevelopment of an existing facility will require an amendment to an approved water management plan. In both cases, MNR will work with the proponent to harmonize any water management planning requirements with information and consultation requirements of other permitting and approval processes (e.g. Environmental Assessment). The redevelopment of existing waterpower facilities, on Crown or private land, may also require approvals from the Ministry of Natural Resources (Lakes and Rivers Improvement Act). Information for these approvals will be co-ordinated with the proponent s environmental assessment process where possible. Proponents are strongly encouraged to meet with the Ministry of Natural Resources to ensure co-ordination of information needs. The supplemental procedural directives to this policy will provide details on how to best coordinate information needs into one process for both new waterpower developments and redevelopment of existing waterpower facilities. 4.3 Tenure The waterpower industry has clearly identified the need for secure tenure for waterpower facilities, especially with the commercialization of the electricity sector. This request has led to the development, in consultation with the waterpower industry, of a generic Waterpower Lease Agreement (WPLA) that is to be used to authorize all new facilities and will be used to replace any WPLAs that expire in the future. The WPLA has a rolling term. In the case of a new facility this means the WPLA is issued for an initial term of thirty (30) years. After the first twenty years the company is eligible for a ten (10) year extension if all terms and conditions in the lease agreement have been complied with; the company provides at least six (6) months notice of the request for an extension; and the MNR has no objections after conducting a review of the situation. If the extension is granted, the WPLA will have a term of twenty (20) years. The company becomes eligible to request a ten (10) year extension every time only ten (10) years remain on the lease agreement. This means the lease agreement has a term that runs between 10 (ten) and 20(twenty) years and is never less than ten (10) years. For existing facilities the initial term will be for 20 years with the extension provisions commencing after the first 10 years.
11 of 13 The WPLA will be used to authorize the footprint of the facility. The footprint will include the generating station, any dams and ancillary building(s) in close proximity to the station and includes the parking lot. WPLAs are issued under the authority of Section 42 of the Public Lands Act. At the present time, this section requires all WPLAs to have an Order in Council signed by the Lieutenant Governor approving the terms and conditions before the WPLA can be issued by MNR. This requirement generally increases the length of time required to issue a WPLA anywhere from two (2) to six (6) months. Dams or ancillary buildings that can not reasonably be included in the WPLA will be authorized with a Crown Lease. Additional flooded areas including head ponds, reservoirs, and along riverbanks will be authorized through a separate tenure document. At the present time flooding may be authorized with either an easement or a licence of occupation. Access roads and transmission lines will, in general, be authorized with land use permits. If the owner of the facility wishes more secure tenure for the transmission lines or roads an easement can be obtained. Due to the need for secure tenure during the construction period and up until the WPLA is issued the Ministry is willing to provide the proponent with a Crown Lease for this period of time. 4.4 Rents & Taxes The lessee is required to pay three charges, two that are set out in the Electricity Act, 1) the water rental charge; 2) the taxes; and 3) the land rents set out in the various tenure documents. In November, 2000 legislation was introduced to encourage development and expansion of waterpower in Ontario. Effective January 1, 2001 the calculation of property taxes and water rental charges paid by waterpower facilities was changed to a percentage of gross revenues of waterpower generating stations. Waterpower leaseholders currently benefit from a 10-year holiday on the gross revenue charges and taxes. This holiday creates incentive for increasing waterpower development in Ontario. Water Rental Charge The water rental charge is the main rent paid by the facility owner for the use of Crown land to produce power. The charge is dependent on the amount of power produced by the facility on an annual basis. The rent is currently set at 9.5% of gross revenue from annual generation as defined in regulation. This charge is only collected for facilities on Crown land. Facilities on private land are not subject to this charge. Taxes Tax is payable on all waterpower facilities, including those on private land. The taxes are also calculated as a per cent of gross revenue from annual generation as defined in regulation. The percentage being charged is set on a stepped scale based on the amount of electricity generated annually by the facility. In general, the more electricity generated, the higher the percentage being charged. The per cent rates are set out in Subsection 92.1(4) of the Electricity Act.
12 of 13 Land Rent The WPLA requires the lessee to pay a land rent. Land rents are also charged for tenure documents issued in addition to the WPLA. All land rents are set by policies issued by MNR. The land rent for a WPLA authorizing the footprint of the facility is set at $1,000. The land rents for tenure documents authorizing flooding, roads and transmission lines are set by Land Management policies. 5.0 DIRECTIVE CROSS REFERENCES PL 4.02.01 Application, Review and Disposition Policy and Procedure PL 4.11.04 Easements (Grant Of) Policy PL 6.01.02 Crown Land Rental Policy PL 4.10.03 Utility Corridor Management Policy PL 4.01.01 Obtaining Orders In Council Procedure Water Management Planning Guidelines for Waterpower, May 2002 6.0 REVIEW DATE Five years from the decision posting on the EBR