Licence to Export LNG
Steelhead LNG (A) Inc., Steelhead LNG (B) Inc., Steelhead LNG (C) Inc., Steelhead LNG (D) Inc., Steelhead LNG (E) Inc. (collectively “Steelhead”) each applied to the NEB pursuant to section 117 of the National Energy Board Act (“NEB Act”) for licences to export gas in the form of liquefied natural gas (“LNG”).
Each Steelhead applicant sought export licences on identical terms, with the exception of the export point. The common terms between each Steelhead applicant were as follows:
(a) A 25-year Licence, starting on the date of first export;
(b) A maximum annual export quantity of 6.9 million metric tonnes (MMt) or 356.5 billion cubic feet (Bcf) of LNG, including a 15% annual tolerance;
(c) A maximum term export quantity of 173 MMt (8,920 Bcf) over the term of the Licence; and
(d) An early expiration clause, whereby the Licence will expire ten years from the date of the approval of the Governor in Council if export has not commenced on or before that date.
The export points of each of the Steelhead applicants are as follows:
(a) Steelhead LNG (A) Inc. requested an export point at the outlet of the loading arm of the proposed natural gas liquefaction terminals which are anticipated to be located near the village of Mill Bay, British Columbia, Canada; and
(b) Steelhead LNG (B) Inc. and Steelhead LNG (C) Inc., Steelhead LNG (D) Inc., and Steelhead LNG (E) Inc. requested an export point at the outlet of the loading arm of the proposed natural gas liquefaction terminals which are anticipated to be located in the vicinity of Sarita Bay near the Trevor Channel, British Columbia, Canada.
In support of the applications, Steelhead submitted the following two studies to demonstrate that the quantity of gas to be exported does not exceed the surplus remaining after the due allowance has been made for the reasonable foreseeable requirements for use in Canada:
(a) Supply and Demand Market Assessments – prepared by Navigant Consulting, Inc. (“Navigant Report”); and
(b) Export Impact Assessments – prepared by Gordon Pickering (“Pickering Report”).
The Navigant Report stated that Canadian and North American markets had ample and stable supplies. The Navigant Report also concluded that the abundant volume of natural gas would help support an assessment that the quantities of natural gas to be exported by Steelhead would not threaten the ability of the market to meet Canadian requirements for natural gas. The Navigant Report conducted a sensitivity test by increasing forecasted demand by 20 percent, and noted that the incremental increases were not material to its conclusions in respect of the surplus of gas available.
The Pickering Report noted further that recent changes in the integrated gas industry from shale gas development would make it highly unlikely that the export applications would cause any difficulty for Canadians to satisfy their own domestic natural gas demands.
The NEB decided to issue an export licence to each Steelhead applicant at their respective export points, subject to the approval of the Governor in Council and subject to the terms and conditions as requested by each of the Steelhead applicants. The NEB held that it was satisfied that Steelhead had demonstrated that the gas resource base in Canada could reasonably accommodate foreseeable Canadian demand, including the LNG exports proposed by the Steelhead applicants.
As part of the conditions of each export licence, the NEB approved a 15 percent annual tolerance, noting that the maximum term quantity of the licence is inclusive of the 15 percent tolerance amount. The NEB also accepted the request for a sunset clause of 10 years in length, noting it to be generally consistent with NEB practice.
