N.L. releases wind-hydrogen fiscal framework, says citizens will be 'primary beneficiaries' of project
NDP energy critic says water royalties are 'worrisome'
The Newfoundland and Labrador government released its wind-hydrogen fiscal framework Thursday, the latest stage in the government plans to build a provincial wind energy industry.
Energy and Technology Minister Andrew Parsons said Thursday afternoon the goal is to ensure the province gets fair value for the resource.
"The whole point of this is to build an industry that is sustainable and will eventually be profitable for the people of this province, versus ensuring that you don't give away your resources for free," Parsons told reporters. "I think we're in a good spot."
The government announced in December that companies looking to build wind energy projects in the province could bid on government-owned land.
In a press release Thursday, the government, which says no projects have been approved so far, said it has extended the deadline for bids until March 23.
"The framework ensures Newfoundlanders and Labradorians will be the primary beneficiaries of the province's resources," said the news release.
Framework details
When asked how the province will benefit from this project, Parsons used the hypothetical example of a "1,000-megawatt project."
Under Thursday's fiscal framework, he said, a 1,000-megawatt project would bring the province around $3.5 billion over the course of 30 years.
"A construction project of that magnitude would generally be in the range of 500 to 1,000 jobs for construction, which generally is in the range of about three years' construction," said Parsons.
The framework includes a water royalty payment, which will occur later in the project during its operations phase, after a project has recovered initial investment costs.
It also includes a Crown land reserve fee with an annual charge of 3.5 per cent of market value of reserved lands, as well as a Crown land lease fee at an annual charge of seven per cent of market value.
A wind electricity tax will be paid once turbines are "in service," with an annual charge of $4,000 per megawatt. Water use fee payments begin with the issuance of a permit, with an annual charge of $500 per 1,000 cubic metres of water licensed and used, as well as water licensed and not used.
He says the framework is similar to that of oil and gas, "in the sense that we hope to allow for people to recover capital that we have, that we're going to cover the decommissioning, that we're going to have the clawback ability."
He says the government is working out the decommissioning piece of the puzzle — for now, he said, the goal is to share the fiscal framework, look at the bids and see what interest companies have in the industry.
Water royalty
Once the announcement for bids was made in December, Parsons says the government shared preliminary draft of the fiscal framework with companies. The water royalties are one shift from the preliminary draft, he said, calling it another way of achieving the same result.
"There's just a fear of that royalty word," said Parsons. "But we felt that with the water that's going to be used, we felt that we could charge on that."
He says cost recovery is a large piece of the puzzle, as there's a lot of risk attached to pursuing projects that take billions of dollars to construct. He says the government wants to prevent failures from occurring down the road.
Labrador West MHA Jordan Brown, the NDP's energy critic, said the water royalties are cause for some concern.
He says the fact the royalties don't kick in until after the project's capital costs are paid off raises concerns over how long the province will be giving up a water resource, one that's being commercially exploited, without collecting any royalties.
"That is very worrisome," he said, "because there might be a point where we might not ever collect costs from some of these projects."
He also says he's concerned about the timeline, and the fact that the government has said in the past that it hopes to get a move on projects quickly.
"That's what worries me, is that, are we going to do our due diligence, are we going to make sure that communities are engaged, that Indigenous groups are engaged, and that everyone feels comfortable with the project," he said.
"Because if no one feels comfortable with the project, that's when problems seem to occur."
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