- Many of Canada's largest power companies risk being frozen out of lucrative new electricity markets because power from large hydro dams doesn't qualify as green under new rules being considered in many parts of the United States.

The pollution watchdog for the North American free-trade agreement says at least one state totally rejects hydro electric power as environmentally friendly, while others consider it green power only if it comes from small-scale stations.

Nearly half the states either have or plan regulations requiring a minimum level of green electricity to be sold in their jurisdictions. Almost none consider power from large dams environmentally benign, says watchdog agency the Commission for Environmental Co-operation.

Most of the $2-billion worth of electricity Canada exports each year to the United States comes from large hydro-electric producers, such as Hydro-Quebec, B.C. Hydro and Manitoba Hydro. All of these utilities have dammed major northern rivers, often extolling the environmental advantages of this approach.

"For producers in the Canadian energy industry that contend all power generated from large-scale hydro power is renewable, it represents an issue of major future importance as states increase over time the mandatory percentages of green electricity sold," the commission said in a statement.

The commission, which is based in Montreal, is holding exploratory talks today on whether it should push Canada, Mexico and the United States into seeking a common definition of green energy.

"As we move toward a continental energy market and as states increase the percentage of electricity that must come from green sources, developing a common definition of those sources will be an important area of harmonization for the NAFTA partners," Janine Ferretti, the commission's executive director, said.

The U.S. rules discriminating against big hydro projects have made some Canadian producers nervous. "We're monitoring, and we're concerned about that," said Glenn Schneider, spokesman for Manitoba Hydro, which sells nearly $500-million worth of electricity to U.S. states and other provinces each year.

Questions about the environmental drawbacks of large hydro projects have irked Canadian utilities. They've argued that big projects don't produce the acid gas and smog emissions that come from coal-fired generating plants, don't leave nuclear waste and are a renewable resource. They believe hydro power should be favoured under any environmental regulations. Coal and nuclear plants would not be accepted as green.

Many conservationists have countered that hydro dams disrupt fish stocks, lead to mercury and methane pollution from the rotting vegetation submerged in reservoirs, and destroy sensitive river habitat.

Most states requiring a percentage of their market to be supplied by green power consider wind, biomass and solar energy environmentally friendly. This green power typically commands a premium in the marketplace and is often 10 per cent more expensive than power from conventional sources.

One state, Missouri, excludes hydro power entirely from the green classification, according to the commission. Others, such as California, consider it green only if it comes from small stations of 100 megawatts or less capacity. One megawatt of capacity would supply the residential power needs of about 350 households.

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