01/20/2015 02:26 EST | Updated 03/22/2015 05:59 EDT

TransAlta withdraws Peace River hydro plan, cites economics

EDMONTON - Alberta's main power utility is stepping back from its plans for a hydro project on the Peace River.

In a letter to the Alberta Utilities Commission, TransAlta Corp. (TSX:TA) says market conditions are behind its decision to pull its application for a 100-megawatt power plant near Dunvegan, Alta.

"(The company) will take steps to update the necessary studies and reapply for the Dunvegan hydroelectric project when economic conditions are more favourable."

TransAlta's plans for the run-of-river project were originally approved in 2009. The plant was supposed to have been completed last year.

But last May the company asked the commission if it could delay the completion date by nine years. A letter, dated Jan. 16 and posted Tuesday, removes even that proposed timetable.

"Right now, things are very uncertain, so it's simply prudent to wait," said TransAlta spokeswoman Leanne Yohemas. "We need a better sense of what's happening in the province, its growth trajectory, so it makes sense to hold back."

Yohemas wouldn't blame the decision entirely on the recent plunge in oil prices, which has resulted in scaled-back capital plans for Alberta's energy sector.

"There's many things happening right now. In this economic environment, it's a good time to wait."

Yohemas said the project remains in TransAlta's future plans.

"We are not cancelling this project. We are waiting to build it until it makes sense."

The delay was welcomed by Carolyn Campbell of the Alberta Wilderness Association, which was part of a coalition of environmental groups that raised concerns about the proposal at public hearings. Campbell suggested the project would present another barrier to fish and wildlife populations on a river already heavily affected by dams upstream in British Columbia.

"Alberta can transition to green energy without the significant damage to our vital river ecology that in-stream hydro brings," she said.

Campbell said that if the project is revived, it will again face regulatory scrutiny.

"It will involve a full approval process," she said. "Hopefully, by then we will have realized the time is long gone when we should be damming our important rivers."

The Dunvegan project is not a full dam, but would increase water levels by 6.6 metres, which would broaden the river for 26 kilometres upstream.

TransAlta promised that fish ladders and other infrastructure for boat passage would mitigate impacts. Environmental groups disputed many of the company's environmental findings and said many questions were left unanswered.

The project was projected to cost $344 million in 2008. Estimates suggested it would have generated hundreds of jobs over the four-year construction period.

Yohemas said the Dunvegan project would boost Alberta's hydro capacity by more than 10 per cent. It claims a greenhouse gas saving of 500,000 tonnes of carbon dioxide over a similar amount of electricity generated by coal.