If sustainability guidelines are not followed, energy subsidies to the largest renewable power plant in the UK may be withdrawn, a minister has warned.
Concerns regarding the environmental credentials of the Drax-owned site, close to Selby, which burns biomass like wood pellets, were raised in the House of Lords.
According to reports, Ofgem is looking into whether Drax has been following the rules for sustainability.
According to Drax, strict governance was in place to monitor compliance.
Critics have questioned the veracity of the industry's claim that the wood burned by Drax is sustainably sourced from forestry waste.
The House of Lords was informed that Drax received about £11 billion in government subsidies for its renewable energy plans.
Labour peer Baroness Jones demanded during the discussion that independent scientists be dispatched to Canada to confirm the sustainability of the wood used to produce biomass pellets.
"Is the minister concerned that Drax's claim to be using sustainably sourced wood from Canadian forests currently lacks any detailed full-cycle carbon accounting and audit trail that we would have a right to expect for that level of subsidy?" she asked Lord Callanan, the Minister for Energy Efficiency and Green Finance.
Using information from Canadian environmentalists, independent crossbencher Baroness Boycott claimed that "the ancient forest was being destroyed for those wood pellets.".
When you're burying your head in the sand, she continued, "Why on earth do you still insist that we are jumping to conclusions?
In response, Lord Callanan stated that Ofgem was looking into the situation and added, "Of course, some of the value of the certificates they have received will be withdrawn if it is proven that they are not in compliance. ".
"Pardon me if I don't necessarily take the statements by some of the Canadian environmentalists as absolute facts," he continued.
"Ofgem is looking into whether or not the biomass is sustainable. Let's wait to see how that investigation turns out. ".
"We are confident in our business and operations and committed to ensuring that the biomass we source delivers positive outcomes for the climate, for nature, and for the communities in which we operate," Drax stated.