Pipeline New Service and Toll – Load Retention Service
In this letter decision, the NEB considered Maritimes & Northeast Pipeline Management Ltd. (“M&NP”) application for approval of a new load retention service and toll (the “Application”).
In the Application, M&NP requested that the NEB approve a new load retention service (the “LRS”) offering, including a new toll (the “LRS Toll”).
The NEB found the LRS and LRS Toll Application to be a premature response that gave rise to significant concerns among affected parties.
The NEB denied the Application, but without making any determination as to whether the LRS Toll would be just and reasonable and not unjustly discriminatory under Part IV of the NEB Act.
Proposed LRS and LRS Toll
The proposed LRS and LRS Toll was for Irving Oil Commercial G.P. (“Irving Oil”) for gas transmission service from the Canada-U.S. border to Irving Oil’s Refinery and cogeneration facility located in Saint John, New Brunswick. The LRS was negotiated between Irving Oil and M&NP and was intended to retain the Irving Oil load on the M&NP system. M&NP submitted that Irving Oil was considering alternative service for the Oil Refinery and Cogen load pursuant to a service offering from Emera Brunswick Pipeline Company Ltd. (“EBPC”), which the Board referred to as the “EBPC Alternative.” M&NP stated that it offered Irving Oil the LRS in direct response to this competitive offer.
The NEB provided the following summary of the key terms and conditions of the LRS and LRS Toll:
• Firm service for a primary term of 13 years, estimated to commence on 1 December 2019.
• Contract quantity of 68,579 gigajoules per day (GJ/d).
• Primary receipt point at the M&NP interconnection with the M&NP U.S. system on the Canada-U.S. border at St. Stephen, New Brunswick and primary delivery point at the M&NP custody transfer station at the Irving Oil Refinery.
• LRS Toll of $0.2417 per GJ/d, only applicable at the designated primary receipt and delivery points.
Legislative Scheme
The NEB explained that Part IV of the NEB Act sets out the NEB’s mandate in respect of traffic, tolls and tariff matters, including:
• Section 62 of the NEB Act, which provides that all tolls shall be just and reasonable and shall always, under substantially similar circumstances and conditions with respect to all traffic of the same description carried over the same route, be charged equally to all persons at the same rate.
• Section 67 of the NEB Act, which prohibits a company from making any unjust discrimination in tolls, service or facilities against any person or locality.
• Section 63 of the NEB Act, which provides that the NEB may determine as questions of fact whether or not traffic is or has been carried under substantially similar circumstances and conditions as referred to in section 62 or whether there is unjust discrimination within the meaning of section 67.
NEB Reasons for Denying the Application
Was the LRS required?
In assessing the Application, the NEB considered whether the LRS was required and whether the EBPC Alternative was well-founded. The NEB found that:
(a) the EBPC system had sufficient existing capacity to serve the Irving Oil load with small facility additions;
(b) the EBPC Alternative would provide comparable service quality as on M&NP; and
(c) Irving Oil would be expected to pursue the EBPC Alternative to meet its service needs if the Application were denied.
The NEB found that from this narrow perspective, the EBPC Alternative arguably represented a credible alternative to service of the Irving Oil load. The NEB agreed with M&NP that an alternative service option need not be fully mature to be considered a credible threat. However, the NEB did not accept M&NP’s assertion that the necessary modifications to the EBPC system to accommodate the Irving Oil Load would require minimal Board regulatory review.
The NEB noted that as the hearing process and evidentiary record evolved, interveners raised significant broad concerns and uncertainties about the future of the natural gas market in the Maritimes and the impact on shippers, in particular, those captive to M&NP. The NEB noted such concerns raised, including current and future supply and markets of M&NP and EBPC; the respective roles of the two systems historically, currently and in the future; and the benefits and costs of inter-pipeline competition.
The NEB found that:
(a) Splitting the domestic market demand between the two pipelines post-2019 might challenge the viability of M&NP, which, as a result, could affect the Maritime natural gas market unfavourably;
(b) other load retention service applications to serve industrial loads in the Saint John raised further concerns about the long-term future of the natural gas market in the Maritimes and the potential impact of load retention services on M&NP’s captive shippers; and
(c) in light of such broad concerns and uncertainties, not all parties with a potential interest in these broader matters – such as all potentially impacted local distribution companies, large industrial gas consumers, and pipelines in the Maritime natural gas market – participated or submitted evidence in this proceeding.
The NEB acknowledged that pipelines must adapt to changing conditions in their markets and that M&NP had proactively developed the LRS proposal to respond to the perceived competition from EBPC. However, the NEB found the LRS and LRS Toll Application to be a premature response that gave rise to significant concerns among affected parties.
Disposition
For the reasons set out above, the NEB denied the Application, but without making any determination as to whether the LRS Toll would be just and reasonable and not unjustly discriminatory under Part IV of the NEB Act.
