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WesPac Midstream – Vancouver LLC Application for a Licence to Export Natural Gas (Letter Decision)

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Export Licence – LNG


WesPac Midstream – Vancouver LLC (“WPMV”) applied to the NEB pursuant to section 117 of the National Energy Board Act (the “NEB Act”) for a licence to export natural gas as liquefied natural gas (“LNG”) for a term of 25 years, with the following characteristics:

(a) Located at the outlet of the loading arm at the WesPac LNG Marine Terminal and the hose connector of the pump at the truck rack at the Tilbury liquefaction plant adjacent to the Marine Terminal, both located at Tilbury Island in Delta, British Columbia; and

(b) Starting on the first date of export:

(i) A maximum annual export quantity of 4.76 billion cubic metres (109m3) or 168 billion cubic feet (Bcf) of LNG; and

(ii) A maximum overall quantity of 116.44 109m3 or 4,100 Bcf of LNG over the term of the licence.

In this Letter Decision, the NEB noted that natural gas exports must:

(a) Be authorized by an order or licence under section 116 of the NEB Act;

(b) Be surplus to Canadian requirements, as determined by the NEB under section 118 of the NEB Act; and

(c) Be reported under section 4 of the National Energy Board Export and Import Reporting Regulations.

Canadian Requirements

WPMV submitted that the quantity of gas it seeks to export did not exceed the surplus to Canadian requirements, through two studies:

(a) Supply and Demand Market Assessment (“SDMA”); and

(b) Export Impact Assessment (“EIA”).

The SDMA stated that the outlook for the Canadian and North American gas markets is characterized by ample, stable supplies and competitive, stable prices. The SDMA also stated that the forecasted Canadian natural gas demand growth rate was not sufficient under any of its sensitivity tests to have a material impact on its conclusions that there will be an adequate volume of surplus natural gas.

The EIA similarly offered conclusions that WPMV’s proposed export volumes were highly unlikely to cause Canadians difficulty in meeting their gas requirements over the proposed licence term. Both reports also noted that not all Canadian LNG export projects will proceed to operation, in which case the surplus amount would be larger.

The NEB held that the resource base in Canada was large, and able to accommodate reasonably foreseeable Canadian demand, including LNG exports as applied for by WPMV. The NEB accepted WPMV’s analysis of Canadian demand, and the size of Canada’s natural gas resources. Accordingly, the NEB determined that Canadian gas requirements will be met.

The NEB found that the aggregate volume of LNG export licences submitted to date represent a significant volume of LNG export from Canada and face a growing, but limited market for LNG. As a result, the NEB also accepted the conclusions of the EIA and the SDMA, that not all LNG export licences issued by the NEB will be used to their full allowance.

Information Requirement Exemption

WPMV requested relief from the information requirements for gas export licence applications pursuant to section 12 of the National Energy Board Act Part VI (Oil and Gas) Regulations (the “Oil and Gas Regulations”), and also from the NEB’s Filing Manual.

The NEB noted that in its Interim Memorandum of Guidance Concerning Oil and Gas Export Applications and Gas Import Applications under Part VI of the National Energy Board Act, the NEB no longer requires applications for export licences to file the information contained in section 12(f) of the Oil and Gas Regulations. Accordingly, the NEB granted the exemption, and therefore found that the further relief from the Filing Manual was unnecessary.

Other Requests by WPMV

WPMV also requested a 15 percent annual tolerance to the amount of natural gas that may be exported for any 12-month period as part of its licence.

The NEB accepted the request for the 15 percent annual tolerance. The NEB noted that the maximum annual quantity under the licence is inclusive of the annual tolerance amount, and it is the NEB’s practice to licence term quantities with an allowance for annual tolerances rather than to expressly grant a term tolerance.

WPMV also requested authorization to export natural gas on its own behalf and as an agent for others. The NEB held that section 116 of the NEB Act does not require the holder of the licence to also be the owner of the natural gas. Therefore the NEB held that this request was unnecessary to include in the terms of the licence.

Export Points

With respect to the export points requested by WPMV, the NEB held that it considers the act of “exporting” to occur at the point where gas is removed from Canada, and not when it is loaded for transport. The NEB noted that the exception to this approach is for loading arms at LNG terminals, where the LNG is loaded directly onto vessels for export. As a result, the NEB approved the following locations as export points:

(a) The outlet of the loading arm at the WesPac LNG Marine Terminal in Delta, British Columbia for marine exports;

(b) The marine cargo terminals in the metropolitan area of Vancouver, British Columbia for marine exports; and

(c) The highway border crossings along the international boundary between British Columbia and the United States.

Licence Expiry

WPMV also requested that the licence expire ten years from the date of issuance if exports have not commenced by that date. The NEB approved this condition, consistent with its standard practice.

Decision

The NEB accordingly decided to issue an export licence to WPMV with the terms and conditions noted above, and subject to the approval of the Governor in Council.

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