Joi Scientific gamble necessary to help cap carbon tax bill: NB Power

NB Power has told the province's energy regulator that the utility's exposure to carbon pricing forces it to explore new technologies that carry financial risk, including an unproven process to convert seawater into hydrogen energy.

Utility officials told the Energy and Utilities Board that while it's possible NB Power will lose money in its partnership with Joi Scientific, it would be even costlier to do nothing.

But they were not able to answer questions about the financial health of the Florida start-up, which has received $13 million from NB Power.

"It is very early stages," chief financial officer Darren Murphy said during questioning by an EUB lawyer at a hearing last week. "I can't speak directly to that particular company."

Murphy described the $13-million payment to Joi — a licensing fee for what the company says is its zero-carbon-emissions technology — as "a small amount" that may help NB Power avoid a much larger carbon tax bill.

"We have got some significant challenges, one of those challenges being carbon and what is the implication to that," Murphy said, pegging the utility's future carbon price bill as $80-90 million per year if it doesn't cut emissions.

"We need to explore every opportunity to mitigate and minimize this carbon impact on the ratepayers of New Brunswick.

But Murphy couldn't say whether Joi, which claims to have discovered a new method to extract energy from seawater, is financially viable.

Nor was Murphy able to say what kind of increase in greenhouse gas emissions would come from another initiative: a proposed iron-ore processing plant linked to the Belledune generating station.

"I know that there is some ongoing dialogue to try to appreciate the implications of a facility like that," Murphy said.

Maritime Iron Inc., has acknowledged that its plant would lead to more carbon dioxide emissions in the province.

That leaves NB Power in the position of pursuing one partnership that may increase emissions — while justifying another by pointing to the need to reduce them.

NB Power must find a new fuel source for its coal-powered Belledune generating station by 2030, when a federal coal phaseout takes effect. That forces it to look at new technologies, Murphy said.

NB Power's $13-million licensing fee to Joi Scientific will give it exclusive rights to first use of the unproven technology, which the company has so far refused to describe publicly or submit for peer-reviewed studies.

The plan is to use the technology to partly power Belledune or a network of smaller generators.

If it works, NB Power can sell the rights to other power utilities and keep a share of the profits. Some energy experts and scientists say Joi's claims are too good to be true.

Recognizing the risk

Half of the $13-million licensing fee came from taxpayers through the province's Regional Development Corporation and half came from NB Power's own research and development budget.

Murphy said the utility recognizes that such spending "will not always turn out with a positive outcome and there will be some need to invest some amount of money that ultimately may not pan out."

He said that's why NB Power uses what it calls a "gating process" to "put boundaries around how much should you put at risk before deciding that this is not a venture that is going to play out."

NB Power CEO Gaëtan Thomas was given a seat on the Joi board of directors "so we could have greater insights as to the organization's operations, its viability, all those kinds of things," Murphy told the EUB.

Even so, he said he was not able to "speak directly" to Joi's financial health.

Hold judgment, asks Joi CEO

In a recent interview with CBC News, Joi CEO Traver Kennedy pointed to what he said was his long career in the software and clean-energy sector.

"I think that while there's often suspicion of corporations and corporate greed and corporate activity, the fact is, I think the track record of my career should speak somewhat to wanting to do good in the world and wanting to create value for people," he said.

"So in that sense, I would ask that people hold their judgment of me until we have gotten this to market."

Energy Minister Mike Holland said on a recent CBC New New Brunswick Political Panel podcast that he hopes the Joi project bears fruit, but he wants to "get to the bottom of" how the deal will work.

At last week's hearing, EUB lawyer Ellen Desmond asked Murphy why NB Power didn't leave the development of new technologies to private-sector investors, rather than putting ratepayers' money at risk.

"It would be nice if we could leave it to others to come up with solutions," Murphy answered. "The others don't have the risk NB Power has."

He said the utility "can't get out from under" that risk.

When Desmond suggested that Nova Scotia Power is facing "similar risks," Murphy noted that province signed an offset agreement with the federal government that avoided the imposition of the federal carbon tax.

Rather than negotiate such a deal, the previous Liberal government of New Brunswick decided to adopt the federal carbon-pricing plan for industry.

The new Progressive Conservative government is now developing an alternative plan, but until Ottawa approves it, "we continue to carry that risk and need to be at least working away at trying to mitigate it," Murphy said.

Impact of iron plant unclear

The Maritime Iron plant was announced by then-premier Brian Gallant in June 2018, just weeks before the start of the provincial election campaign.

CBC News later revealed that Gallant's government had started shelling out $625,000 in taxpayer money in 2015-16 for "pre-feasibility studies" for the plant. The company received another $91,699 from the province in 2017-18.

Gallant and the company said at the time that while the iron plant would generate new emissions, using some of its gas byproduct at NB Power's Belledune plan would reduce its coal use and emissions.

But Murphy was unable to tell the EUB what the net emissions impacts would be. "Personally, I don't know what those are," he said.

He said ultimately Maritime Iron, not NB Power, "has a big responsibility to research and understand how their facility will be treated from an emissions perspective."

As opposition leader, Premier Blaine Higgs pointed to the Liberal subsidies for Maritime Iron to rebut Gallant's criticism that the PCs lacked a plan on emissions.

"I wouldn't be putting government money into one of the largest emitting plants possible," he said.

Last summer, the company said there would be more details of its emissions impact when it filed its environment impact assessment application. As of Friday, it has not registered for an assessment.

Maritime Iron CEO Greg McKenzie could not be reached for comment Friday.