Section 118 Surplus Criterion, Liquified natural gas
In this decision, the CER considered an application by Chevron Canada Limited (“Chevron”) pursuant to section 117 of the National Energy Board Act (“NEB Act”) for a 40-year licence to export natural gas in the form of liquified natural gas, with a maximum quantity of 982 109 m3 or 35 trillion cubic feet (Tcf) of natural gas over the term of the licence. The CER issued a 40-year License to Chevron Canada to export natural gas, subject to the approval of the governor in council (“GIC”), as well as a number of terms and conditions.
Section 118 Surplus Criterion
The key issue in the proceeding was the NEB Act section 118 Surplus Criterion. Chevron submitted that as required by the section 118 Surplus Criterion, the quantity of natural gas it sought to export did not exceed the surplus remaining after due allowance has been made for the reasonably foreseeable requirements for use in Canada, having regard to the trends in the discovery of gas in Canada. An intervenor argued that Chevron failed to meet its onus to provide evidence with respect to the section 118 Surplus Criterion.
Views of the CER
The CER accepted the expert evidence submitted by Chevron, noting that it was satisfied with the use of projections from the NEB publication Canada’s Energy Future 2016: Energy Supply and Demand Projections to 2040 (“EF2016”). The CER agreed with Chevron’s expert that, since those resource data were published, nothing has happened that would reduce confidence in the abundance of the resource. The CER also agreed that proved reserves account for a small fraction of the total resources. The intervenor’s expert did not provide sufficient evidence to convince the CER otherwise.
The CER also noted that it did not agree with the intervenor expert’s argument that broader North American gas resources are irrelevant to Canadian requirements. A project’s connection to the North American gas market is an important factor when determining that the Surplus Criterion is met.
The CER also noted that it did not find cumulative licensed volumes to be an accurate or meaningful measure in assessing whether Canadians’ requirements for natural gas will be met. Because of the fact that LNG ventures are competing for a limited global market, and face significant economic and financial challenges, the CER took the view, consistent with that of its predecessor the NEB, that not all LNG export licences issued will be used or used to their full allowance.
Decision
The CER approved Chevron’s application for a 40-year licence to export natural gas in the form of liquified natural gas.
