Surplus Determination – New Export Licence
In this decision, the CER decided, pursuant to Section 344 of the Canadian Energy Regulator Act (“CER Act”), to issue a 25-year Licence to AltaGas Limited Partnership (“AltaGas”), subject to the approval of the Minister of Natural Resources, to export propane subject to the terms and conditions described in Appendix I to the letter decision. Further, the CER decided that the term of the Licence would commence upon Ministerial approval.
Background
On November 28, 2019, AltaGas applied to the CER, pursuant to Section 344 of the CER Act, for a licence to export propane seeking:
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a 25-year Licence to export propane, starting on the date of first export;
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including a 15% annual tolerance, a maximum annual export quantity of 2,669,391 cubic metres (“m3”) or 16,790,000 barrels (“bbls”);
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a maximum quantity of 66,734,775 m3 or 419,750,000 bbls of propane over the term of the Licence;
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the point of export of propane from Canada to be a marine export terminal located near Prince Rupert, B.C. and points along the Canada – United States border where railway crossings occur (specifically: Lacolle, Quebec; Emerson, Manitoba; North Portal, Saskatchewan; Coutts, Alberta; Kingsgate, British Columbia; Huntingdon, British Columbia; and White Rock, British Columbia); and
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an “early expiration clause” where, unless otherwise directed by the Commission of the CER, the term of the Licence ends 10 years after the date of issuance of the licence if the export of propane has not commenced on or before that date.
AltaGas responded to an information request (“IR”) from the CER, stating that it had no business reason for selecting a new long-term export Licence instead of applying to vary (or revoke and reapply for) GL-338 to reflect increased volumes and additional export points.
Surplus Determination
In response to and CER IR, AltaGas submitted that the quantity of propane it would export would not exceed the surplus remaining after due allowance was made for the reasonably foreseeable requirements for use in Canada having regard to the trends in the discovery of gas in Canada. In support of this submission, AltaGas submitted two studies: (1) Canadian Propane Supply and Demand through 2055 by Goobie Tulk Inc. (“GTI Report”), and (2) AltaGas LPG General Partner Inc. Propane Export Licence Application: Implications and Surplus Assessment Report by Mr. Roland Priddle (“Priddle Report”).
The Priddle Report describes Canadian and North American natural gas resources as very large and indicates it was reasonable to assume that the amount of propane, preponderantly a product of gas processing, that could be available to market from those resources is also likely very large.
The GTI Report provides three scenarios of propane supply that show Canadian propane production growing over the forecast period, with this growth dependent on liquefied natural gas (“LNG”) export projects coming on-stream. GTI provided a no-LNG (“GTI Base”) forecast and two LNG scenarios for propane production: (“GTI LNG 1”) and (“GTI LNG 2”).
GTI expected propane supply in Canada to grow from 244.1 thousand barrels per day (Mb/d) in 2018 to 321.2 Mb/d in 2023 in all three scenarios. By 2055, propane supply would grow to 336.4 Mb/d (GTI Base), 410.1 Mb/d (GTI LNG 1), and 497.3 Mb/d (GTI LNG 2). The GTI Report anticipates relatively steady growth of domestic propane demand in Canada over the forecast period. In its GTI Base scenario, the forecast shows Canadian propane demand of 103.5 Mb/d in 2018 growing to 178.5 Mb/d in 2055. In its GTI LNG 1 scenario, the forecast shows Canadian propane demand growing to 190.3 Mb/d in 2055.
The Priddle Report notes that propane prices would continue to be formed competitively by market forces balancing supply and demand within supportive policy and regulatory frameworks. Canadians would always be able to meet their propane requirements at market-determined prices. The Priddle Report concludes that it was relevant to add that the export of the propane in this Application was unlikely to affect the potential for short-term propane market disruptions in the Canadian and North American industry.
Views of the Commission
According to Section 345 of the CER Act, it is the CER’s role to assess whether gas proposed to be exported exceeds the surplus remaining after due allowance has been made for the reasonably foreseeable requirements for use in Canada, having regard to trends in the discovery of gas in Canada. In fulfilling this mandate, the CER recognized that Canadian propane requirements were met in the context of free trade within a North American energy market.
The CER accepted the AltaGas’ analysis of current and forecasted Canadian propane demand and its assessment that Canadian propane requirements would be met over the term of the Licence, given the resource base and the integrated nature of the North American propane market.
The CER accepted the position presented in the GTI Report and the Priddle Report that the North American propane market is generally liquid, open, efficient, integrated and responsive to changes in supply and demand.
The CER monitors Canada’s NGL supply and demand, including propane and other NGL developments. Monitoring assists the CER in identifying where markets may not be functioning properly or where the evolution of supply and demand casts doubt on the ability of Canadians to meet future energy requirements. The CER noted that the evidence in this Application is generally consistent with the CER’s current market monitoring.
Commencement of Term of Licence and Issuance of Single Licence
The CER considered whether any exports or propane by AltaGas should occur under the authority of one licence, by varying the existing GL-338, or two licences, by issuing a standalone new Licence.
The CER issued, subject to Ministerial approval, a new Licence to AltaGas, as GL-338 and GL-344 have different terms and some different export points, and to promote administrative efficiency in the reporting and monitoring of exports.
Relief from Filing Requirements
AltaGas requested relief from the information requirements for propane, butanes, or ethane export applications set out in Section 20 of the National Energy Board Act Part VI (Oil and Gas) Regulations (“Part VI Regulations”), except where those requirements are addressed within the Application.
The CER was satisfied that AltaGas met the filing requirements of Section 20 of the Part VI Regulations and the CER found that AltaGas showed that it was unable to provide further information.
The CER recognized that not all filing requirements contained in Section 20 of the Part VI Regulations were relevant to its assessment of this Application. Therefore, the Commission exempted AltaGas from the filing requirements contained in Section 20 of the Part VI Regulations that were not included in the Application.
