Biomass such as wood shavings can be turned into energy. (CBC)

Nova Scotia Power and NewPage Port Hawkesbury have reached an agreement to develop a $200-million facility to generate electricity by burning biomass.

They are planning a 60-megawatt biomass project that could produce three per cent of the province's electricity to supply 50,000 homes.

This proposal is similar to one rejected by the Nova Scotia Utility and Review Board last year. But this version is promising to create an additional 150 jobs in the woods of northern Nova Scotia.

NewPage already burns bark and junk logs to produce energy at its pulp and paper operation in Cape Breton. If this project proceeds, the company will use "stem wood," which means tree stumps, tops and branches will be left on the forest floor to restore nutrients to the soil.

The project will eliminate the newsprint mill's need for oil and sell surplus green energy to Nova Scotia Power, thereby reducing its environmental footprint.

Environmentalists were critical of the previous proposal, saying it would require too much of the forest to be cut down.

Newpage woodlands manager Bill Stewart said those concerns are unfounded.

"NewPage harvests the equivalent of one per cent of the land that it manages. So, biomass will represent a very small part of that. We don't do whole tree harvesting today. We use stem wood only," he said.

The two companies are heralding it as a way to create jobs and meet requirements for sustainable energy.

"We think this is a win for the environment and a win for the local economy," said Robin McAdam, Nova Scotia Power's vice-president of sustainability.

"This partnership with NewPage is consistent with our commitment to only pursue projects where we are assured that sustainable harvesting practices will be employed.

"At the same time a request for proposals [RFP] is being issued to solicit competing renewable projects.… The RFP process will test the competitiveness of this proposed project."

Nova Scotia Power will hire a third-party auditor to make sure NewPage leaves behind the stumps and branches of harvested trees.

The project is expected to create about 150 new jobs, mostly in the forestry industry, and help the mill maintain a workforce of around 550 employees.

The companies hope to have the co-generation facility running by late 2012. First, the proposal must be approved by the URB, which ruled last July that it didn't have the authority to approve an operational expense for an amount that would affect power rates for more than two decades.

It also said that it didn't have enough information to judge the merits of the project.