Breaking into Canadian natural gas distribution has turned out to be a tall order even for a newcomer encouraged by provincial energy policy, helped by a government grant, and supported by committed customers.
After two years of waiting in vain for voluntary cooperation with plans for new northern Ontario gas service, Nipigon LNG Corp. has applied for a National Energy Board (NEB) order for TransCanada Corp. to make supplies available.
Nipigon LNG has a C$27-million ($22-million) grant from an Ontario utility service expansion program to create a liquefied natural gas (LNG) delivery network along the remote northern shore of Lake Superior.
The venture’s parent company, Northeast Midstream LP, secured franchise agreements with five towns: Manitouwadge, Marathon, Schreiber, Terrace Bay and Wawa. The deals select trucked LNG as the most economic supply for the sparsely populated region.
Nipigon LNG, named after the nearest community to its proposed liquefaction plant, only seeks to draw about 7 MMcf/d off TransCanada’s cross-country gas Mainline with a 500-meter (1,635-foot) leg of new pipe.
But for TransCanada the tiny northern supply demand threatens to revive a sore spot in mainline relationships with the nation’s biggest distributors, Enbridge Gas Distribution Inc. in Toronto, and Union Gas Ltd. in southern Ontario.
Documents before the NEB show TransCanada has refused to supply Nipigon LNG on grounds that the big distributors might see the requested new northern pipe as a bypass that would create a rival to their franchises. A contract between TransCanada, Enbridge, Union and Quebec’s Gaz Metro bans bypasses.
“It is not in the public interest for TransCanada to require a new shipper to obtain approval from other shippers to access natural gas from the TransCanada Mainline,” says Nipigon LNG in its application for an NEB order to overturn the obstruction.
“Such influence by TransCanada and the [local distribution companies] has potential to prevent opening up new or alternative energy markets and to frustrate the public interest mandate of the NEB and the economic and environmental policies of the Province of Ontario.”
The NEB is circulating a request for comment. In Ontario, the new conservative government is proposing legislation to amend the gas service expansion program launched by the previous liberal provincial regime.
Details of how the amendments would affect plans like Nipigon LNG remain unknown until the provincial cabinet eventually enacts regulations enabled by the broad legislative provisions.
“The province is moving forward with a new policy approach,” says a government letter that pledges the conservatives will honor the grant commitment Nipigon LNG secured from the liberals but adds that changes are coming.
The letter says the conservatives plan to pay for their version of gas encouragement with a consumer surcharge.
“The proposed program would collect a small amount per month from natural gas customers throughout the province to support natural gas expansion.”
Nipigon LNG predicts that the Ontario Energy Board will define the ability of old distributors to block newcomers from creating new gas services in a forthcoming decision on an application for a provincial approval certificate for the proposed northern pipe leg.
Ontario’s conservative government estimates its version of gas service expansion has the potential to connect 33,000 households in more than 70 remote communities that the established utility franchises have left out of their grids.