Liquefied Natural Gas – Directions to Provide Facilities and Service
In this decision, the NEB considered Nipigon LNG Corporation (“Nipigon”)’s application for orders pursuant to sections 12, 13, 59, and 71 of the National Energy Board Act (“NEB Act”) directing TransCanada PipeLines Limited (“TransCanada”) to provide facilities, and service under just and reasonable terms, to connect and transport gas from the TransCanada Mainline pipeline system (the “TransCanada Mainline”) to Nipigon’s planned liquefied natural gas (“LNG”) project (the “Application”).
The NEB denied the Application.
The Application
Nipigon requested the following relief:
(a) an Order, pursuant to subsection 71(3) of the NEB Act, directing TransCanada to provide adequate and suitable facilities for the interconnection of the Nipigon LNG Project (the “Project”) with the TransCanada Mainline by June 30, 2020. The interconnection would be at a point on the Northern Ontario Line (the “NOL”) segment of the TransCanada Mainline west/upstream of TransCanada’s Nipigon Compressor Station in the unorganized Township of Ledger (the “Ledger Interconnection”);
(a) an Order pursuant to subsections 71(2) and (3) of the NEB Act, directing TransCanada to establish a new delivery point at or near the Ledger Interconnection by June 30, 2020;
(b) an Order, pursuant to subsection 71(2) of the NEB Act, directing TransCanada to transport and deliver, on a firm basis, up to 7,200 GJ/day of natural gas to Nipigon, commencing June 30, 2020, or so soon thereafter as is reasonably practical in the circumstances (the “Ledger Delivery”); and
(c) an Order, pursuant to section 59, section 71 and Part IV of the NEB Act, prescribing just and reasonable terms for the Ledger Delivery, including:
(i) service pursuant to terms consistent with TransCanada’s standard renewable firm service agreement for an initial period of 10 years; and
(ii) just and reasonable tolls calculated in a manner determined by the NEB.
According to the Application, despite the proposed Project not being located in a Local Distribution Company (“LDC”) franchise area, TransCanada would not proceed with the Ledger Interconnection without written confirmation from the LDCs – Union Gas Limited (“Union”) and Enbridge Gas Distribution Inc. (“EGDI”) – that Ledger “[was] not a current or potential franchise area”. According to the Application, TransCanada said that this requirement stemmed from the Mainline Settlement Agreement between TransCanada, Union, EGDI, and Énergir, L.P. (the “Settlement”). The Settlement contained a no-bypass provision whereby TransCanada would not construct facilities to directly serve LDC customers within the LDCs’ franchise areas. According to Nipigon, TransCanada also noted it would not proceed with pre-work for the Ledger Interconnection until Nipigon obtained all provincial approvals.
NEB Findings
The NEB Act gives the NEB discretion to:
(a) order a company operating a gas pipeline to provide gas transportation service (section 71(2)(a)); and/or
(b) require a company operating a gas pipeline to provide facilities required for gas transportation service, gas storage, or the junction of the gas pipeline with other transmission facilities (subsection 71(3)).
The NEB denied the Application finding that there was no need to issue the orders and that the public interest would not be served by issuing the orders.
The NEB found that several issues raised in the Application were since dealt with in subsequent filings from TransCanada and the LDCs. Given the confirmation from Union and EGDI that the Project was not within either of their existing franchise areas, TransCanada said that it “could provide the requested service without bypassing Union or EGDI for the sole purpose of serving a customer base of these LDCs”. TransCanada also said that it would proceed with the interconnection of the Project through its normal course of business, via the execution of a backstopping agreement with Nipigon, the addition of a new distributor delivery area within Ledger, and application for regulatory approvals. In the NEB’s view, this was the most appropriate way to advance the Project.
The NEB found that the reasons provided by Nipigon to grant the orders were not compelling, based on the following:
(a) It would be unfair to TransCanada, its shippers and potential shippers to grant the requested Orders for Nipigon to satisfy financing conditions – the details of which Nipigon did not provide.
(b) Nipigon did not provide any compelling evidence in terms of why its unique financing circumstances warranted the relief requested.
(c) Requiring TransCanada to build interconnection facilities without a financial backstop in place would place an undue burden on the company, and place risk on the Mainline and its shippers.
Summary
The NEB denied granting the Orders requested by Nipigon.
The NEB expected that TransCanada would uphold its commitment to advance discussions with Nipigon as it would normally do with any other party seeking service requiring additional facilities on the Mainline in accordance with its tariff.
