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Canadian Natural Resources Limited -Primrose East Power Plant and Industrial System Designation Amendment Project, AUC Decision 25184-D02-2020

Link to Decision Summarized

Facilities – Industrial System Designation


In this decision, the AUC considered applications from Canadian Natural Resources Limited (“CNRL”) to construct and operate a 32-megawatt power (“MW”) plant designated as the Primrose East Power Plant, and to amend the existing Primrose Industrial System Designation to include the Primrose East Power Plant. The AUC approved the applications.

Introduction and Background

In 2007, CNRL was granted an industrial system designation (“ISD”) for its operation at the Primrose industrial complex. In this proceeding, CNRL requested approval to construct and operate a 32 MW power plant, and that the existing Primrose ISD be amended to include the 32-MW power plant.

CNRL stated that the proposed Primrose East Power Plant would consist of a natural gas power plant with one gas turbine generator unit and provision for the future installation of an associated heat recovery steam generator (“HRSG”) unit. CNRL stated that its Primrose oil production facility is currently subject to provincially legislated oil production curtailment, and as such, does not currently have an increased demand for steam. It plans to convert the power plant to a cogeneration unit in the third quarter of 2023, subject to management approval, when more steam is required by the Primrose facility; and that because the electrical and steam demand growth is not in sync, it makes economic sense to install the power plant in advance of the HRSG.

Discussion

CNRL submitted an economic assessment of the project and demonstrated the project’s economic benefit when compared to the purchase of power from the Alberta Interconnected Electric System (“AIES”). The economic assessment showed that at net present value, the project would result in $130 million in savings when compared to the option of purchasing power from the AIES. The assessment also demonstrated that there were savings from the project, compared to the option of purchasing power from the AIES, even when the export revenue and transmission charges were not considered.

CNRL hired an independent engineering consultant to investigate the transmission capacity of the Primrose ISD interconnecting circuit and the capability of the surrounding Cold Lake electrical system near the Primrose 859S Substation. The results of the investigation showed that a transmission facility upgrade would be required to serve the incremental load growth if the proposed project was not built. The capital cost of this upgrade was initially estimated to be between $10 and $15 million.

CNRL stated that although the Primrose ISD is a net importer of electricity, it has an existing Supply Transmission Service contract with the Alberta Electric System Operator for 85 MW. CNRL has sized the project, including the future HRSG addition, to meet the current and future load and steam requirements of the Primrose industrial complex. The industrial system would continue to exchange electricity with the AIES after the project is built. However, CNRL expects to use all of the power generated by the project within the Primrose industrial complex by 2026.

CNRL estimated the investment to install the proposed power plant to be $34.5 million, and the total investment for the installation of the proposed power plant, the future installation of the HRSG, and other process elements to be $105 million.

AUC Findings

The AUC outlined the statutory scheme, including the criteria for determining whether a project should be designated as an industrial system under section 4 of the Hydro and Electric Energy Act (“HEEA”).

The AUC was satisfied that the technical, siting, emissions, environmental and noise information provided meets the AUC’s application requirements under Rule 007. It also found that the participant involvement program met the requirements of Rule 007.

The noise impact assessment predicted that the cumulative sound levels for the proposed power plant comply with the daytime and nighttime permissible sound levels, and the AUC was satisfied that the project complies with Rule 012.

The AUC considered that the economic assessment of the amended industrial system continues to support the development of an internal, economical supply of generation to meet the requirements of CNRL’s integrated industrial processes. In addition, the amended ISD would support the principles of efficient and economic exchange with the AIES, while not facilitating an independent system or uneconomic bypass of the AIES.

The AUC was satisfied that, with the addition of the proposed power plant, the Primrose ISD will continue to meet all of the ISD criteria set out in subsection 4(3) of HEEA except for the common ownership requirement found in subsection 4(3)(c).

Subsections 4(4) and 4(5) set out further criteria for the AUC to consider when a project does not meet those set out in subsection 4(3). Subsection 4(4) states:

(4) Where the Commission is not satisfied that subsection (3)(c) or (d) has been met, the Commission may make a designation under subsection (1) if the Commission is satisfied that all of the separately owned components and all of the industrial operations are components of an integrated industrial process.

In this instance, some of the components of the integrated system are owned by a joint venture that is 50 percent owned by CNRL and 50 percent owned by Heartland Generation Limited, and all the 25-kilovolt distribution facilities are owned and managed by ATCO Electric Ltd. Notwithstanding this, the AUC was satisfied that all of the separately owned components and all of the industrial operations are components of an integrated industrial process. Consequently, it found that the project substantially meets the requirements of subsection 4(4) of HEEA.

The AUC noted that subsection 4(5) gives it the discretion to approve an ISD application if subsections 4(3) and 4(4) have been substantially met and there is a significant and sustained increase in efficiency in a process of the industrial operation or in the production and consumption of electric energy by the industrial operation as a result of the integration of the electric system with the industrial operations the electric system forms part of and serves. The AUC found that subsections 4(3) and 4(4) were substantially met. Having considered the economic analysis provided by CNRL, it was also satisfied that the addition of generation capacity at this time will result in a significant and sustained increase in efficiency for the industrial operations on site.

The AUC approved the applications to construct and operate the 32-megawatt Primrose East Power Plant and to amend the existing Primrose Industrial System Designation to include the Primrose East Power Plant.

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