Mesa Power Group – the wind development company owned by Texas billionaire T. Boone Pickens – has begun a legal claim against the Canadian government, alleging that the province of Ontario’s green energy programme violates the North American Free Trade Agreement (NAFTA).
Mesa contends that two of its wind projects were placed at competitive disadvantage for 20-year power purchase contracts against NAFTA free-trade regulations.
The complaint comes after provincial feed-in tariff (FIT) administrator Ontario Power Authority made “last-minute” changes to rules for awarding them spelled out in the provincial Green Energy Act .
At stake were contracts that will pay premium rates for power generated from renewable energy sources in the Bruce transmission region in western Ontario. The power authority last month imposed a rule change that allowed projects from an adjacent transmission district to link with the Bruce region.
This meant that only about 62% of green energy FIT contracts announced 4 July went to Bruce-based projects – but not Mesa’s.
“This clear favoritism disadvantaged Mesa, as well as other wind developers and clearly violates the spirit, goals and objectives of the North American Free Trade Agreement,” says Cole Robertson, a Mesa Power executive. He contends that the 150MW Twenty Two Degree and 115MW Arran wind projects are among the most advanced in Ontario and could be in operation by the end of 2012.
Both projects were ranked among the top 700MW of clean energy candidates in first round of FIT applications from the Lake Huron shoreline that were held awaiting approval of the Bruce to Milton transmission line, according to a power authority list made public last 21 December. The line will have 1.2GW capacity with construction now underway.
“Other projects that received contracts under the disputed rules will take years to complete and will require extensive planning of new, expensive and unnecessarily long transmission lines,” claims Robertson.
In a statement, Ontario Energy Minister Brad Duguid rejected Mesa’s complaint. “The Ontario Power Authority runs an open, fair and transparent process to award clean energy contracts under the feed-in tariff programme,” he says. All companies, domestic and foreign, are treated equally with the same opportunities to participate, Duguid adds.
NAFTA created a trilateral trade bloc in North America comprising Canada, Mexico and the US. It came into force in 1994.
In its filing, Mesa cites several other alleged NAFTA violations by Ontario in the regulation of renewable energy. Those include the province's "buy local" contract requirements that the Green Energy Act requires for developers to get grid access. Mesa also challenges preferential treatment given to certain FIT participants including Korean-based Samsung C&T Corporation.
The South Korean company in 2010 signed a deal to invest up to C$7bn in Ontario in green energy including solar and wind farms with 2.5GW capacity, and manufacturing facilities to support both sectors. In return, it would get C$22m a year in subsidies over two decades if it meets agreed milestones including job creation, plus feed-in tariff rates and guaranteed transmission capacity as generation comes on line.
NAFTA gives private companies the ability to sue member nation governments before a dispute resolution panel. While Mesa’s complaint targets a provincial policy, international trade negotiations come within federal jurisdiction under Canadian law.
Mesa contends that an electricity contract should not be considered as provincial procurement. NAFTA does allow provinces to set their own local content guidelines for their own procurement programmes.
Mesa says it expects to file a formal NAFTA Notice of Arbitration after 3 October, which would begin the international process to examine the “fairness and propriety” of Ontario’s programme.
Mesa has been trying to find projects in Canada and the US that can take most, if not all, of the 333 wind turbines that it has on order from General Electric. It has two other projects in Ontario totaling 200MW.
The GE 1.5MW units are part of an order for 667 turbines – since halved - worth about $2bn that Mesa placed in May 2008 for a large wind farm in the Texas Panhandle. Pickens froze the project last year, citing lack of transmission and low gas prices that he says have made wind power less important in the US energy mix.