NL releases wind-hydrogen tax framework and says citizens will be the ‘main beneficiaries’ of the project
The Newfoundland and Labrador government on Thursday released its wind-hydrogen tax framework, the latest phase of the government’s plans to build a wind power industry in the province.
Energy and Technology Secretary Andrew Parsons said Thursday afternoon the aim 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 ultimately be profitable for the people of this province, rather than making sure you’re not giving away your resources for free,” Parsons told reporters. “I think we’re in a good place.”
The government announced in December that companies wishing to construct wind power projects in the province could bid on state-owned land.
In a press release Thursday, the government, which says no projects have been approved so far, said it had extended the deadline for bids to March 23.
“The framework ensures that Newfoundlands and Labradors are the primary beneficiaries of the province’s resources,” the press release said.
When asked how the province would benefit from this project, Parsons gave 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 about $3.5 billion over 30 years.
“A construction project of this magnitude would generally be in the range of 500 to 1,000 jobs for construction, which is generally in the range of about three years of construction,” Parsons said.
The framework includes a water levy that is due later in the project during its operational phase after a project has recouped initial capital costs.
It also includes a Crown Land Reserve Fee with an annual fee of 3.5 percent of the market value of the reserved lands and a Crown Land Lease Fee with an annual fee of 7 percent of the market value.
Once the turbines are “up and running,” a wind power tax is paid at an annual fee of $4,000 per megawatt. Water use fee payment begins upon issuance of a permit with an annual fee of $500 per 1,000 cubic meters of licensed and used water and licensed and unused water.
He says the framework is similar to that of oil and gas “in the sense that we’re hoping that we’re going to enable people to recover capital that we have, that we’re going to cover the decommissioning, that we’re going to have the reclamation capability.” .”
He says the government is working on the decommissioning piece of the puzzle – for now, he said, the aim is to share the fiscal framework, look at the offers and see what interest companies have in the industry.
kings of the water
After the December tender, the government shared the preliminary draft of the tax framework with companies, Parsons said. The water rates are a shift from the preliminary draft, he said, calling it another way to achieve the same result.
“There’s only one fear of that royal word,” Parsons said. “But we felt that with the water to be used, we could charge for it.”
He says that cost recovery is a big piece of the puzzle because there’s a lot of risk involved in pursuing projects that cost billions of dollars to build. He says the government wants to prevent future outages.
Labrador West MHA Jordan Brown, the NDP’s energy critic, said water tariffs were a cause for concern.
He says the fact that royalties are only accrued after the project’s capital costs are paid off raises concerns about how long the province will abandon a water resource that is being commercially exploited without collecting royalties.
“This is very worrying,” he said, “because there may come a point where we may never collect the costs on some of these projects.”
He also says he’s concerned about the timeline and the fact that the government has said in the past it hopes to move projects forward quickly.
“That’s what worries me: will we do our due diligence, will we make sure that communities are engaged, that indigenous groups are engaged and that everyone is comfortable with the project,” he said.
“Because if no one feels comfortable with the project, problems will appear to arise.”
Read more from CBC Newfoundland and Labrador