Virtual Pipeline Hitting Roadblocks in Tumbler Ridge

Lynsey Kitching


The discussions continue between council and Pacific Northern Gas (PNG) in regards to their proposed virtual pipeline.

The project is now being delayed due to reduced urgency for a permanent solution, as Tech is delaying the opening of the Quintette mine. This reduces the forecasted demand for 2014 to 40,000 GJ, down from 100,000 GJ.

Because of this change, PNG has to change some of the assumptions made in the initial application. Also, PNG has become aware of several items that were presented incorrectly or require updates due to new information.

On top of these changes, PNG has received high volumes of first-round Information Requests from the British Columbia Utilities Commission (BCUC). PNG requires additional time to conduct and appropriate internal reviews of these responses.

This means all projected dates will be extended by about two weeks.

At a recent council meeting, PNG came in to answer questions from council, community members and press.

The room became very warm, heated by discussions and answers from PNG president Greg Weeres and Graeme Doak, PNG VP of Human Resources and Government relations.

Though the discussions went on for more than two hours, some of main themes included why the community of Tumbler Ridge will have to pay more when it is the mines that need the increase in natural gas, and how many trucks will be running up and down the highway to and from Dawson Creek daily.

Though Weeres tried to keep the story straight, there were some contradictions especially when it came to the rate changes for the community with or without the virtual pipeline.

“Right now, we are able to deliver to Quintette about half of the volume they are looking for without implementing the virtual pipeline,” says Weers. “What they have told us, is if we are not able to meet their full energy needs, they will convert to an alternative energy source. This did happen when Quintette shut down, What is really happening, is they are contributing to the overall spreading of the cost pool. If the Quintette volumes disappear from what they are forecasting, than all of the other customers rates will go up. More than they will if we can meet the Quintette requirements.”

He stated if PNG doesn’t proceed with this alternative it will be a five to six percent increase and with the virtual pipeline residential rates will go up one or two percent.

This is because, according to PNG, they would be losing Teck as a current customer, thus rates in town would have to go up to cover the loss on a per unit delivery basis.

However, later on, Weeres said, “If Quintette leaves, our fixed costs will change very little, they have very few facilities we need to look after. Residential customers are more expensive to look after because they have more needs. Our cost pool is not going to change whether they are on the system or not on the system. We still have the processing plant, the pipeline and the infrastructure, as a result that cost pool will not change.”

Another main issue brought forth is in regards to who should be paying for the needed infrastructure to supply Quintette and possibly other mines with natural gas.

Mayor Wren brought up the point that if a company wants to have natural gas supplied to their business; the company must pay to build the pipeline. Weeres agreed. This prompted Mayor Wren to ask the obvious question: “If it is their cost to build a pipeline, that is their cost. Then why aren’t these trucks their cost? No wonder they like this deal. Because we are paying for it.”

The question was also asked about the wear and tear and the traffic that will be caused by the trucks hauling natural gas from Dawson Creek.

The proposed plan states it will take two loads per day to supply Teck with 40,000 GJ annually. However, they are asking for 160,000 GJ, so that increases the traffic to eight loads per day. On top of this, if HD Mines (who have not officially agreed to anything) need the projected 500,000 GJ per year, that will result in about 27 loads per day on the one lane highway connecting Dawson Creek to Tumbler Ridge.

Doak states at this (when there is that much demand) it would be economical to build a pipeline for the mines, seemingly contradicting his earlier assertion that the virtual pipeline was a “long-term sustainable solution.”

“One of the advantages of the virtual pipeline, is these assets are re-deployable and salable. Should the load increase we could meet that increased demand, the effect of that would be to lower rates for all of the existing customers. The flip side is, if the customer that has approached us requesting firm demand, Quintette mine, should they not proceed after 2014 with reopening that facility, these assets would then be redeployed to another part of our system and/or sold off. Removing the burden from Tumbler Ridge subsequent from that,” states Weeres.

So this means Tumbler Ridge residents would be paying for these trucks and infrastructure—which we don’t need for our community consumption—and then PNG could turn around and begin using these trucks for a new grid, with Tumbler Ridge having footed the bill.

At this time, this remains only a proposal. All of this information still has to be approved by the BCUC. Weeres cautions: “If the BCUC refuses to approve this approach to provide the service to Quintette than our estimate is that rates in Tumbler Ridge will go up five to six percent for residential customers. If we are able to provide service to Quintette under this approach, we believe rates to residential customers will go up, but it will be one or two percent.”

Councillor Caisley’s understanding is that PNG has created this proposal but in fact it is the BCUC who must approve the rates asks, “Are we talking to the wrong people?”

PNG has also had conversations with Walter Energy and Anglo American about using the virtual pipeline.

“You have had conversations with Walter Energy and Peace River Coal [Anglo American], potentially interested. So if you have the 500,000 GJ potential from HD 160,000 GJ for Teck, potential for other two mines and you’ve mentioned others, go to them and secure contracts,” says Mayor Wren.

Weeres says, “The other factor is we have infrastructure to provide natural gas to Quintette because they were a previous customer. All of the other mines are distant from the community. That is their cost and undoubtedly a solution on a per mine basis because we have already looked at it and it is not economical for them.”

Does it matter what is economical for the residents of Tumbler Ridge?

Mayor Wren says, “The system is broken.”