HALIFAX - Nova Scotia's regulatory agency opened hearings Monday into a large biomass fuel proposal that has environmentalists worried about the future of the province's forests and ratepayers uncertain about the cost of electricity.

Nova Scotia Power Inc. and Newpage Port Hawkesbury Corp. are asking the Utility and Review Board to approve a plan to burn 650,000 metric tonnes of wood a year to fire a steam generator at the Cape Breton paper mill. The project would take advantage of the unused capacity on Newpage's main boiler by adding a steam turbine generator and associated equipment.

In documents filed with the board, the proponents say the project would produce about 400 gigawatts of power — about three per cent of the province's total electricity needs — while meeting the mill's need for steam.

Robin McAdam, Nova Scotia Power's executive vice president of sustainability, said the project would help the company take a "large step" toward meeting renewable energy targets for 2013.

They would like a decision from the board by October.

"We need this project for 2013 compliance and it does put us on track toward that," he said as the hearing got underway. "We'd like to see this plant running by the end of December 2012."

The applicants say the $200-million project would create 150 new forestry jobs and help Newpage maintain 550 jobs at its mill.

The provincial government is demanding 25 per cent of Nova Scotia's energy supply come from renewable resources by 2015.

The utility says it has relied almost exclusively on wind generation to help it meet initial targets, but now it needs to look at biomass.

Consumer advocate Bill Mahody pressed utility officials during the hearing for clarity on the effects of a 40-year biomass supply contract on power rates.

"It is the ratepayers who bear this risk entirely in relation to the way this project is currently structured," said Mahody.

"Ratepayers want to know that the deal has been done with as much certainty and that the costs are as certain as they can be."

The plan is opposed by a coalition of environmentalists and woodlot owners who fear it will lead to an increase in clear cutting.

Jamie Simpson, a forester with the Ecology Action Centre, said he finds it hard to believe the harvest could be sustainable even though the proponents plan to use stem wood only, leaving trunks and branches to restore soil nutrients.

"There's undoubtedly a role for biomass energy in Nova Scotia but this proposed project is not the responsible route to take," he said in his opening remarks to the board.

"While we do not oppose the use of biomass per se, it is critical that Nova Scotia go down this path with a clear understanding of the impacts on our forest resources and greenhouse gas emissions."

The Ecology Action Centre's concerns about wood supply were echoed by Neal Livingston of the Margaree Environmental Association.

"Our concern is that this plant is too big for Cape Breton. ... We think that there will be as much as a 50 per cent increase in cutting on the island and eastern Nova Scotia," he told the board.

"NSPI and Newpage are essentially locking up the wood supply, which could be used for other things."