Export Licence – LNG
Cedar 1 LNG Export Ltd. (“Cedar”) applied to the NEB pursuant to section 117 of the National Energy Board Act (the “NEB Act”) for a licence to export natural gas in the form of liquefied natural gas (“LNG”) on the following terms:
(a) A licence term of 25 years;
(b) A maximum annual export quantity of 8.55 billion cubic metres, or 302 billion cubic feet of LNG, including 15 percent annual tolerance;
(c) A maximum term quantity of 214.10 billion cubic meters, or 7,558 billion cubic feet;
(d) An export point located at the outlet of the loading arm of the liquefaction terminals which Cedar anticipates to be located in the Northern Douglas Channel, near Kitimat, British Columbia; and
(e) An expiration clause where the licence will expire ten years after approval from the Governor-in-Council if LNG exports have not commenced on or before that date,
(collectively the “Licence”).
In support of the applications the Cedar applicants submitted two studies to demonstrate that the quantity of gas to be exported does not exceed the surplus remaining after the due allowance has been made for the reasonable foreseeable requirements for use in Canada:
(a) The Long-Term Natural Gas Supply and Demand Forecast to 2050 – prepared by Ziff Energy (“Ziff Report”); and
(b) A Description of the Implications on the ability of Canadians to meet their natural gas requirements and an Assessment of whether this gas is surplus to reasonable foreseeable requirements for use in Canada – prepared by Roland Priddle (“Priddle Report”).
The Ziff Report stated that Canadian and North American resource bases were robust and continue to grow. The Ziff Report also stated that there was an abundance of low-cost natural gas due to shale gas and unconventional gas plays, and expected the markets to function efficiently throughout its forecast period. The Ziff Report conducted a sensitivity test by increasing forecasted demand by 20 percent, and noted that the incremental increases were not material to its conclusions in respect of the surplus of gas available.
The Priddle Report concluded that the Canadian gas markets have and will likely continue to be adequately supplied, and that such a trend would continue under an integrated gas market, which was characterized as highly liquid, open, and efficient. The Priddle Report also concluded that the abundant volume of natural gas would help support an assessment that the quantities of natural gas to be exported by Cedar would not threaten the ability of the market to meet Canadian requirements for natural gas.
The NEB decided to issue the Licence to Cedar at the proposed export point, subject to the approval of the Governor in Council and subject to the terms and conditions as requested by Cedar. The NEB held that it was satisfied Cedar had demonstrated that the gas resource base in Canada could reasonably accommodate foreseeable Canadian demand, including the LNG exports proposed by Cedar.
As part of the conditions of the Licence, the NEB approved a 15 percent annual tolerance, noting that the maximum term quantity of the Licence is inclusive of the 15 percent tolerance amount. The NEB also accepted the request for a sunset clause of 10 years in length, noting it to be generally consistent with NEB practice.
