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The stacks of the Tufts Cove power generating station in Dartmouth, N.S. Nova Scotia and the federal government have inked a deal that gives the province flexibility in meeting greenhouse gas emissions regulations.

Larry MacDougal for The Globe and Mail/larry macdougal The Globe and Mail

The federal government will allow Nova Scotia to manage its own emission regulations for coal-fired power plants, with an exemption from federal rules that will serve as a precedent as Ottawa moves to impose new greenhouse gas targets on the energy sector.

Environment Minister Peter Kent was in Halifax on Monday to announce the two governments have agreed in principle on an "equivalency" arrangement in which a province can opt out of federal regulations so long as it has its own measures to achieve the same results.

Nova Scotia has pledged to reduce greenhouse gas emissions in its electricity sector by 25 per cent by 2020, and under the federal deal will extend its target to 2030. Rather than regulate each coal-fired plant, Nova Scotia expects to meet its target through the adoption of renewable energy projects and a partnership with Newfoundland and Labrador's Nalcor Energy in developing the Lower Churchill power project which will include an undersea cable to Cape Breton.

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Mr. Kent said he expects to publish final regulations by the end of June which would require all new coal-fired power plants to meet emissions levels generated by the most efficient gas-fired plants. Existing coal plants will have to be shut down at the end of their 40-year commercial lifespan unless they can be refitted with carbon-capture-and-storage equipment.

The equivalency agreement "allows the province of Nova Scotia to manage its own house," the minister said in an interview from Halifax. "It's not a complicated concept – it requires a partner province to recognize the national targets but fill in the details on its own."

He said the deal would be finalized this summer after Ottawa publishes its final rules, which are to take effect July 1, 2015.

Mr. Kent has followed the coal regulations with new emission rules on the natural-gas-fired power sector, as well as the oil refineries and oil sands plants. He said the provinces may choose to opt out of those rules through equivalency agreements, so long as they can demonstrate a plan to achieve similar results.

"That's on the table [for future regulations] absolutely," he said.

Nova Scotia, Saskatchewan and Alberta will face the biggest challenges because they are most reliant on coal to fuel their electricity sectors. All three provinces have complained about the lack of flexibility in the federal approach, saying it will unnecessarily drive up costs to consumers and interfere with their own attempts to regulate greenhouse gas emissions.

Ottawa is in talks with Saskatchewan about concluding an equivalency agreement, but Alberta wants the federal government to show more flexibility in its own approach. The province – and its two leading power companies, TransAlta Corp. and Capital Power Corp. – have warned the federal rules could make it impossible for companies to proceed with plans to equip the Keephills 3 plant with carbon-capture-and-storage capability.

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Alberta Energy Minister Ted Morton said Friday the province is having "extended discussions" with Ottawa on the coal regulations and suggested the two sides are far from agreement.

One contentious item is the fate of Maxim Power Corp.'s 500-megawatt Milner generating station near Grande Cache. The company says it expects to break ground on the project this summer and will take three years to complete it, but the plant must be commissioned prior to July 1, 2015, to avoid the new federal rules.

Mr. Kent wouldn't comment on Maxim itself but he indicated little sympathy for complaints that the deadline leaves the company with a major risk problem as it looks to line up financing.

"The July, 2015, coming-into-effect deadline wasn't posted as a loophole for people to be getting under the wire and enjoying a 50-year, regulation-free run," he said.

With files from reporter Josh Wingrove in Edmonton

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About the Author
Global Energy Reporter

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More

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