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BC Steps on the (Natural) Gas With NGV Incentives

British Columbia's (BC) largest gas distributor has taken a lead position in a program allowing utilities and their customers to fund incentives for natural gas vehicle (NGV) use, thereby boosting the market for the province's production.

"All gas utility customers will benefit from the additional volumes of natural gas moving through Fortis BC's pipeline system," President Doug Stout said in announcing the company's bid to participate in the province's NGV growth plan, the Greenhouse Gas Reduction Regulation. "The costs of maintaining the pipeline systems are recovered in the delivery rates of all customers. Better year-round optimization of these pipeline assets -- especially during the summer months when heating requirements are reduced -- will result in a long-term, positive impact for our customers."

The provincial government's new utility regulation enables distribution companies to make heating fuel and other natural gas customers pay for providing new NGV services. Over a five-year period ending March 31, 2017, the rule authorizes gas distributors to put up to C$104.5 million each into NGV conversion programs and fueling stations.

The regulation enables NGV conversions in all three fields of ground transportation. Fortis BC's program includes C$62 million for conversions of diesel vehicles, C$30.5 million for liquefied natural gas (LNG) fueling stations and C$12 million for compressed natural gas outlets. The company plans to file a cost recovery application for the program soon with the BC Utilities Commission.

The west coast arm of Newfoundland-based Fortis Inc. has 1.1 million customers in 2,300 communities. The BC service territory forms a vast, upside-down "T" that reaches north up the central interior of the province and east-west across its southern border with the United States. From Vancouver suburbs in the southwest to the BC oil and gas capital of Fort St. John in the northeast, the Fortis service range is a hotbed of road, rail and marine travel and commerce.

Supporters of the NGV regulation said the scheme may sound like energy price inflation in the short run, but over the longer haul the approach has potential to pay dividends to all gas users by spreading costs of the distribution network thinner. BC follows the customary national and provincial Canadian utility practice of "rolled-in" tolling that makes everyone connected to pipeline networks pay for service additions.

BC Energy Minister Rich Coleman called the new rule a step toward "global leadership in clean transportation." Environment Minister Terry Lake added, "The shift from vehicles that use costly, higher-polluting diesel to those that use locally sourced natural gas is another example of made-in-BC innovations that are part of our green economy."

The measure was foreshadowed in a 22-page policy document that the province's Liberal government put out earlier this year, "British Columbia's Natural Gas Strategy: Fueling BC's Economy for the Next Decade and Beyond." Gas has emerged as a cornerstone of an overall economic program titled "Canada Starts Here: The BC Jobs Plan."

The NGV regulation is a consumer counterpart to supply-side initiatives encouraging northern BC shale gas drilling and construction of liquefied natural gas export terminals and pipelines. The grand design is rooted in Canadian industry consensus that BC's new gas fields will replace Alberta's depleting old reserves as the national mainstay of domestic and export supplies.

The consensus is documented in the latest 25-year outlook report compiled by the National Energy Board (NEB). By the 2030s, BC production is projected to triple into a range exceeding 10 Bcf/d, while Alberta recedes to 6 Bcf/d and its thermal oilsands plants consume nearly two-thirds of its gas output. BC's NGV regulation is by far the biggest practical initiative that has emerged so far from a national gas industry campaign for policies to help the projections come true by overcoming the current slump in markets, prices and drilling.

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