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VANCOUVER (Reuters) - Mesa Power Group, a Texas-based renewable energy company owned by billionaire T. Boone Pickens, plans to file a complaint with Canada charging that the province of Ontario's green energy plan violates the North American Free Trade Agreement (NAFTA).
Mesa said on Thursday it initiated the complaint process after Ontario made "last-minute" changes to rules for awarding power purchase agreements under the feed-in tariff (FIT) provisions of its Green Energy Act, passed in 2009.
Mesa Power was unsuccessful in winning contracts for two wind energy projects it wants to build in western Ontario in the latest round of FIT awards made by the province on July 4.
Ontario's FIT scheme pays generous, above-market rates to producers of renewable energy from sources such as the sun and wind under 20-year, fixed-price contracts.
The program has lured C$20 billion ($21 billion) in investment commitments to the province from both local and international investors, including Mesa Power.
The Canadian government has received Mesa Power's notice of intent to submit a claim, and should it proceed with the complaint, Ottawa will "vigorously defend" the country's interests, a Trade Department spokeswoman said.
This is not the first international challenge to Ontario's green energy plan, which the province launched to create jobs, cut emissions and fill some of the supply gap left from the closure of coal-fired power plants.
In June, Japan asked the World Trade Organization to form a legal panel to decide whether the Green Energy Act, which stipulates that at least 60 percent of equipment used in installations qualifying for the feed-in tariff be manufactured in Ontario, gives an unfair advantage to local equipment makers.
The plan is also under fire from the province's opposition Progressive Conservative Party, which has vowed to scrap it if they win the October 6 election -- a plausible outcome as they lead the ruling Liberal Party by double-digits in opinion polls.
Mesa Power said its 115 megawatt Arran and 150 MW Twenty Two Degree wind projects were high up on a December 2010 list of projects that were expected to receive contracts from the Ontario Power Authority in the Bruce transmission region.
However, on June 3, the power authority changed its rules to allow projects in a neighboring transmission region to connect to the Bruce area. Nearly 40 percent of the megawatts awarded on July 4 went to projects in the new area. Mesa's projects, which the company said could have been in operation by the end of 2012, did not get contracts.
"Other projects that received contracts under the disputed rules will take years to complete and will require extensive planning of new, expensive and unnecessarily long transmission lines," said Cole Robertson, a Mesa Power executive.
"This clear favoritism disadvantaged Mesa, as well as other wind developers, and clearly violates the spirit, goals and objectives of the North American Free Trade Agreement," Robertson said.
Mesa's filing also mentions the "buy local" requirements and challenges the "preferential treatment" given to certain investors, including South Korea's Samsung C&T Corp.
Last January, Samsung committed to invest C$7 billion in the province to build wind and solar farms and green energy equipment manufacturing sites. Critics have slammed the agreement, which includes C$437 million in subsidies for the Korean company and access to the power grid.
Mesa said it expects to file a formal NAFTA notice of arbitration after October 3, which would launch the international process to review the Ontario program.
($1 $0.96 Canadian)
Additional reporting by Louise Egan in Ottawa; editing by Rob Wilson