Item - 2024.IE14.9

The Infrastructure and Environment Committee recommends that:

1. City Council request the Minister of Municipal Affairs and Housing to amend O. Reg. 595/06, FEES AND CHARGES, to allow the City to charge gas utilities for their use of public lands as Edmonton, Calgary, Regina and Winnipeg do, in order to fund infrastructure resilience against the impacts of climate change.

2. City Council direct the General Manager, Transportation Services, to report back to Infrastructure and Environment Committee by the fourth quarter of 2024 on whether the current fees charged to gas utilities for pavement degradation resulting from utility cuts fully recover all short and long term related costs and damages incurred by the City.

3. City Council direct the Executive Director, Environment and Climate, to work with Clean Air Partnership and the Association of Municipalities of Ontario to explore a collective municipal approach to ensure a fair payment system for fossil fuel pipelines that use municipal property and how best to ensure a level playing field between fossil fuel and low carbon infrastructure investment, and to report back to Infrastructure and Environment Committee by the second quarter of 2025.

4. City Council write to the Auditor General of Ontario requesting an investigation of Bill 165 and its impact on Toronto residents.

That Infrastructure and Environment Committee:

1. Requested the Executive Director, Environment and Climate, in consultation with the City Solicitor, to report directly to the June 26, 27 and 28 meeting of City Council with an analysis of Recommendations 1, 2 and 3 in the motion by Councillor Saxe, with the report to City Council to include considerations of staff resources required, the timelines to deliver on the directives, and any recommended change to the wording of the Recommendations.

Natural gas is a fossil fuel responsible for over half of Toronto’s annual greenhouse gas emissions as the primary energy source for heating buildings.

The TransformTO Net Zero Strategy aims to accelerate a rapid and significant reduction in natural gas use in buildings, identifying this as one of four "critical steps" to achieving City Council's goal of net zero emissions by 2040. This critical step is consistent with a worldwide energy transition away from fossil fuels because they are the main cause of climate change.

Enbridge Gas Inc. is the utility serving Toronto's consumption of natural gas through a network of transmission and distribution pipelines that connect to over 550,000 gas customers in Toronto.

While the City has clearly identified the need to reduce reliance on natural gas, its actions are limited by the jurisdiction provided in provincial legislation. Whether City Council could enact a by-law to ban the transmission, distribution, sale, or use of natural gas within Toronto depends on the scope of the City’s by-law authority under the City of Toronto Act, 2006 and related statutory authorities.  Among other things, section 11 of City of Toronto Act, 2006 limits that authority to those City by-laws that do not conflict with a provincial or federal statute, regulation, order, license, approval or similar instrument.  Additional information about this issue is included in Confidential Attachment 1 to the City Solicitor’s supplemental report on this item.

This report focuses on the matters raised in Council motion 2024.IE11.8, namely the City’s relationship with Enbridge regarding renewable natural gas projects, City staff’s recent comments on Bill 165 which deals with expanding new connections to the provincial natural gas grid, and Enbridge’s use of public property (especially the right of way).

Beyond these specific matters, the City has the ability to influence demand for natural gas through setting standards for greenhouse gas emissions and energy efficiency for new and existing buildings in Toronto. For new buildings, the City’s innovative Toronto Green Standard recommends energy efficiency and greenhouse gas intensity standards that are intended to become progressively more stringent over time for new residential (minimum 10 units) and non-residential developments. Toronto Green Standard consists of tiers of performance with Tier 1 being mandatory and applied through the planning approval process. It is intended that by May 2028, if adopted by Council, the Toronto Green Standard requirements for near zero greenhouse gas emissions will discourage new natural gas connections for heating or domestic hot water. City Council has also directed staff to develop an Emission Performance Standards by-law to address greenhouse gas emissions from existing buildings. If Council enacts a by-law requiring existing buildings to meet such emission standards, then property owners may need to take measures to reduce the greenhouse gas emissions from their buildings, which may include reducing the use of natural gas.

Regarding the matters raised in Council motion 2024.IE11.8:

- Renewable Natural Gas - In collaboration with Enbridge, Solid Waste Management Services has developed Renewable Natural Gas production facilities at the City’s Organic Processing Facilities. While the City’s production of Renewable Natural Gas can play a useful role in the energy transition, it will be a limited role because production is itself limited by the amount of biogas and landfill gas available. Solid Waste Management Services is currently working with Enbridge towards development of an Renewable Natural Gas production facility at the City’s Green Lane Landfill

- Bill 165: In April the Executive Director of Environment and Climate made oral and written submissions to the Ontario Legislature’s Standing Committee on the Interior, pursuant to Council authority, detailing concerns about potential negative affordability and climate impacts for Toronto from Bill 165, the Keeping Energy Costs Down Act, 2024. The written submission is Attachment “A” to this report. The Environment and Climate Division is monitoring for consultation opportunities with the Government of Ontario on its forthcoming natural gas policy statement, announced by the Minister of Energy alongside Bill 165.¹

- Enbridge Use of Public Property: Provincial regulation currently precludes the City from applying a land-based charge for Enbridge’s use of the right of way (same for a telecom company, electricity generator, or electricity transmitter or distributor). Municipalities outside Ontario can and do charge gas utilities for use of the right of way (including Edmonton, Calgary and Regina) generating revenue between $24 and $97 per capita annually. Were the Province to amend its regulation and City Council decided to apply a land-based charge to Enbridge’s use of the right of way, it could generate between $73 million and $293 million in total annual revenue based on the range of currently observed charges elsewhere. If City Council decided to apply a land-based charge it could also decide to reduce the amount by the amount Enbridge would otherwise pay in property taxes on its gas pipelines in a given year. City staff plan to engage with the province about potential for regulatory change.

Enbridge could seek to pass on the cost of any land-based charge for use of the right of way to natural gas ratepayers in Toronto. Whether Enbridge could do so would be subject to provincial laws and regulatory approval.

Applying a land-based charge could align with the need to transition away from fossil fuels and move toward lower carbon energy like electricity from Ontario’s relatively clean grid and local renewable generation. To the extent that Council directed any future revenues from a land-based charge for Enbridge’s use of the right of way (if permitted by law) toward adapting City infrastructure like roads, bridges and sewers to withstand the impacts of climate change caused by fossil fuels, such as more frequent and intense storms, this could amplify the climate-related benefits of the charge.

¹https://news.ontario.ca/en/backgrounder/1004216/the-keeping-energy-costs-down-act