PNG Files for the Virtual Pipeline to Tumbler Ridge

Trent Ernst, Editor


On July 17, Pacific Northern Gas (PNG) filed for “a Certificate of Public Convenience and Necessity to Acquire, Construct, Own and Operate a Compressed Natural Gas Virtual Pipeline between the Communities of Dawson Creek and Tumbler Ridge.”

Tumbler Ridge has a limited amount of Natural Gas available due to infrastructure limitations. The company says that it could add in more infrastructure or tap into an existing sweet gas pipeline, but both these would cost millions of dollars.

In the 52-page application, PNG says they are designing the system to “minimize the rate impacts to Tumbler Ridge customers and maintain competitive industrial rates.”

Dawson Creek customers will see “negligible or no rate impacts,” with the “potential for future rate reductions and other benefits through additional load growth and throughput on the system,”

In order to build the virtual pipeline, PNG will need to build a Compressed Natural Gas facility in Dawson Creek and a receiving and injection terminals on this end. They would also need to buy specialized trailers to transport the natural gas.

In order to fund the project at the Dawson Creek end, PNG is seeking permission to sell natural gas in bulk from the location, as well as possibly a natural gas vehicle fueling station. The estimated cost to build the facilities in Dawson Creek would be about $1.7 million.

The cost for building the receiving and injection facilities in Tumbler Ridge would cost $2.1 million, which would be included in the Tumbler Ridge rate base.

This worries mayor Wren, who says the District has put in for intervener’s status. “We’ve requested that the president come before council to explain pros and cons to residents of Tumbler Ridge,” says Wren.

Council, says Wren, is worried that the virtual pipeline, which is primarily being established to provide natural gas for the industrial sector, will result in higher gas prices for the average consumer, too. He doesn’t think this is fair, especially as recent price hikes have hit Tumbler Ridge harder than other areas in the Peace. “Is the cost of that infrastructure going to be borne by the residents? If it saves the locals money, that’s great, but if it is only adding cost, then we have concerns.”

The trouble is that natural gas is billed in usage areas, and expenses incurred in one area are charged to that area. So if, PNG added $1-million in infrastructure to Fort St John, that cost would be spread out over all the residences of Fort St. John, of which there are 11,210. This would mean the cost increase per dwelling per year would be about $90, far less if we include all the businesses and industry. (Note that these figures are just to illustrate how the system works and not in any way accurate.)

In Tumbler Ridge, the same million dollar increase, spread out across the town’s 1158 dwellings would mean that each household would be paying $863 per year more. And if Quintette isn’t around to pay their portion of that, the cost per dwelling goes up.

So PNG finds itself in a bit of a catch-22. Lose the industrial customers, and the price goes up. Or build more infrastructure to retain the industrial customers and the cost still goes up.

The company could build in additional capacity at the current gas plant, but that would cost in excess of $5-million, the cost of which would have to be past on to local residents.

A second option would be to tap into an existing sweet gas pipeline. There are a number in the area, but the closest one is 15 km away. This option would cost at least $3-million, and probably more, as that price doesn’t factor in the mountainous terrain.

The virtual pipeline is the best of the options, says PNG, carrying a price tag of under $2-million, plus ongoing operational costs.

According to PNG forecasts, demand of 40,000 GJ in 2013/2014 will ramp up to 160,000 when the mine goes into operation. And that doesn’t even factor in HD Mines, Anglo American and Walter Energy.

PNG says that CNRL, who supplies its gas “has recently indicated it will be adding a facilities charge estimated at $1.20 per GJ effective 2014 to recover the cost of securing new sources of gas to supply PNG’s processing plant.”

Therefore, says the document, it is factoring that in when calculating the impact to Tumbler Ridge consumers. Even so, the virtual pipeline is slightly higher than the cost of CNRL gas only, costing $4.93 per GJ, as opposed to $4.84 per GJ without the virtual pipeline in 2014, and about five cents higher the year after.

And that’s not factoring in the additional delivery charge, from $7.07 to $7.25 GJ in 2014 and four cents more in 2015.

The total cost per GJ in 2014 for residential customers is estimated to be $12.17. That’s up from $9.50 rate which took effect last month.

Council is already upset at that rate increase, which bumps Tumbler Ridge residential rate to more than two dollars higher per GJ than customers in Dawson Creek.

But as it stands, the price will be going up no matter what; even without the new virtual pipeline, rates would be bumped up to $11.91 for residential customers.

Large commercial customers, on the other hand, will be paying $9.22/GJ. And this is what makes Mayor Wren upset. “We understand there’s an increased demand. What the question comes down to is: who best to bear the price. If it is solely for heavy industry use, should the residents of TR bear the brunt? The community needs to know what’s happening here.”

Wren says that the council is doing “all we can to make sure they’re being charged in a fair and reasonable way.”

But as it stands, Tumbler Ridge customers can expect to pay a lot more for gas next year; upwards of $200 or more, depending on usage.