Pacific Northern Gas is offering up the prospect of lower rates for its existing customers in the northwest provided two small-scale natural gas liquefaction projects go ahead.
Port Edward LNG on the north coast and Top Speed Energy’s Skeena LNG at the Skeena Industrial Development Park just south of the Northwest Regional Airport, would help fill PNG’s line running west of Summit Lake near Prince George to Prince Rupert that began losing large-scale industrial customers over the years.
Without large volumes running through the line, PNG’s existing residential and commercial users have had to shoulder the cost of maintaining the line, resulting in natural gas user rates much higher than elsewhere in B.C.
PNG business development director Brock John confirmed the utility had signed contracts with Port Edward LNG and Top Speed sufficient for it to start detailed planning and regulatory approval applications leading to spending approximately $60 million between Terrace and Prince Rupert to enable it to pump more gas.
The project would involve service lines to the Port Edward LNG and Top Speed locations, upgrade four existing compressor stations and add two compressor stations, one at the industrial park and the other near Salvus between Terrace and Prince Rupert.
“Increasing the amount of natural gas flowing throughout the system, with new industrial loads for example, will have a positive impact on the delivery rates for our more than 20,400 customers in the region,” he said.
The natural gas line running from Summit Lake west to Prince Rupert is now at only about 20 per cent of capacity, John added.
Based on a timeline of anticipating regulatory approval from the B.C. Utilities Commission next summer, John said construction should start the fall of 2021 with completion the spring of 2024.
That timeline hinges on the progress of Port Edward LNG and Top Speed receiving their own regulatory approvals from the BC Oil and Gas Commission, arranging construction financing and signing up customers.
Port Edward LNG, a privately-held B.C. company, has purchased 37 acres in a private sale along Hwy 16 within the District of Port Edward and the council has given first and second readings to rezone the property for industrial use.
A first phase would produce 250,000 gallons a day with double that based on a second phase expansion.
First phase construction would work out to roughly one standardized container of super-cooled gas an hour that would be trucked to the Fairview Container Terminal for export to a number of Asian countries, explained Port Edward LNG president Chris Hilliard. He declined to identify those countries but did say it has customers lined up.
Hilliard also declined to provide the cost of the first phase development but did say it anticipates a construction start of early next year.
The gas would be cooled using electricity by connecting to a nearby BC Hydro substation.
Chinese-owned Top Speed Energy first unveiled its Skeena LNG plans in 2019, saying it wanted to build a small-scale facility processing 150,000 tonnes of liquefied natural gas a year at the Skeena Industrial Development Park. The plant would also supercool gas for storage in specialized containers.
The cooled product would then be transferred into specialized containers and stored on-site for short periods until it’s loaded onto trucks for delivery to domestic or international markets through the Fairview Container Terminal in Prince Rupert.
As with Port Edward LNG, the Skeena LNG location is close to PNG’s natural gas line and close to a B.C. Hydro line from which it would obtain power to run its facility.
The Skeena LNG project has been under review by the BC Oil and Gas Commission for much of 2020. Clark Roberts, CEO of Top Speed Energy, said he remains confident and hopeful that the project will be certified.
Once that certification is received, civil engineering for the Skeena LNG plant is set to begin in summer 2021, with construction expected to start in summer 2022 and a potential in-service date of early 2023.
Roberts confirmed that the Skeena LNG plant will be connected to the PNG line.
“We look forward to working with them and with the Terrace community,” Roberts said.
This year, Top Speed indicated it could also use power from Kitselas Geothermal Inc., a partnership of the Kitselas First Nation-owned Kitselas Development Corporation and Calgary-based Borealis GeoPower, should its own plans to tap hot water from geothermal springs near Lakelse Lake materialize.
Roberts said the Kitselas Geothermal project may not be ready in time to immediately service the Skeena LNG plant, but the plant will likely be constructed in a manner that would allow use of the geothermal energy once ready.
PNG began losing large-scale industrial customers beginning with the Skeena Cellulose pulp mill in 2001 followed by Methanex’s Kitimat methanol and ammonia facility in 2005 and West Fraser’s Kitimat pulp and paper mill in 2010.
That set the stage for increases from PNG’s remaining customers along its line so that this fall while a residential customer is paying a delivery charge of $12.470 per gigajoule of natural gas, a Fortis B.C. customer on the lower mainland is paying $5.615 a gigajoule. Natural gas utilities are not allowed to add to the cost of the gas itself.
John, the PNG representative, said it was still too early to estimate the kind of rate relief the utility’s existing customers could expect should Port Edward LNG and Top Speed go ahead.
“What we’re anticipating is rate stabilization for our customers,” he said.
PNG does expect, however, to recover its planned $60 million expenditure from what it will charge the two companies.
This is not the first time PNG has had hopes of filling its pipeline with new industrial customers.
It was involved in another small-scale LNG project at Prince Rupert called Triton LNG but shelved that in 2015.
The utility came close with another small-scale LNG project through its then-parent company, AltaGas of Calgary, in the early part of the last decade. It would have been a floating facility near Kitimat called Douglas Channel LNG.
But in 2016 with LNG prices on the decline and without waiting Asian customers, the project was cancelled.
John cautioned that its $60 million plan would only go ahead should Port Edward LNG and Top Speed both proceed.
The contracts it now has with the two companies, he said, have provisions to protect PNG and its customers from risk in case the projects do not move forward.
If only one project was to proceed PNG would likely scale back the need for all of the compressors and the location of the project would determine where and how much gas compression is required, he added.
This project is separate from another one PNG is planning, a $84.5 million expenditure to repair and replace sections of its existing pipeline along 80 kilometres from Salvus, between Terrace and Prince Rupert, and its Galloway pressure regulating station near the Galloway Rapids outside of Prince Rupert and Port Edward.
Its applied for regulatory approval through the B.C. Utilities Commission and is anticipating a two-year construction period beginning the middle of next year.
PNG is hosting two evening virtual information sessions, one on Nov. 25 and the other on Nov. 30. More details at www.png.ca/projects/recap.
(With files from Jake Wray)