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ATCO Gas and Pipelines Ltd Cloverbar Hydrogen Lateral Transmission Pipeline Project, AUC Decision 28555-D01-2024

Link to Decision Summarized

Gas – Facilities

Application

ATCO Gas and Pipelines Ltd (“ATCO”) applied for approval to construct and operate 1.4 kilometers of new 219.1-millimeter high-pressure natural gas pipeline and related above-ground facilities (the “Project”) intended to supply a new hydrogen power plant that is located within the Aurum Industrial Business Park in the city of Edmonton.

Decision

The AUC approved the application for construction and operation of the gas pipeline, finding that the Project is in the public interest having regard to its social, economic and other effects, including environmental effects.

Pertinent Issues

Approval for new gas utility pipelines in Alberta generally follows two separate application processes. In the first application process (rates process), the gas utility seeks approval of rates to recover its prudently incurred costs, and requests the AUC’s approval of forecast capital expenditures for new pipeline facilities in the context of a general rate application made pursuant to the Gas Utilities Act (“GUA”). In its general rate application, the gas utility includes a business case for the proposed new pipeline that describes the need or justification for the project, and the alternatives available to meet that need.

In the second application process (facility process), the gas utility seeks the AUC’s approval to construct and operate new pipeline facilities, pursuant to the Pipeline Act (“PA”) and the GUA. The facility application generally focuses on the site-specific impacts of a project. When deciding whether to approve the facility application, the AUC must first determine if the need or justification for the new gas utility pipeline was identified and approved in the rates process. If so, the site-specific impacts of the proposed facilities are assessed to determine if approval is in the public interest.

While gas utilities in Alberta generally follow these two application processes for the approval of new gas utility pipeline projects, there is no statutory requirement that they proceed in this manner.

Pursuant to Rule 007: Applications for Power Plants, Substations, Transmission Lines, Industrial System Designations, Hydro Developments and Gas Utility Pipelines (“Rule 007”), a gas utility may seek approval to construct and operate a new gas utility pipeline under the PA and the GUA without prior approval of the associated forecast capital expenditures. In that case, the AUC would consider the need for the project, the alternatives, and the specific routing, all within the facility proceeding, without approving the forecast rate increases necessary to recover the project’s costs.

In this case, based on the Project’s timeline requirements, ATCO requested that the project need be considered in the facility proceeding despite it being originally filed as part of ATCO’s 2024-2026 general rate application that is currently under consideration by the AUC in Proceeding 28369.

The Application

The AUC was satisfied that the information requirements Rule 007 were met,  including the participation involvement program, accepting that there were no outstanding public or industry objections or concerns. The AUC found that the environmental requirements were sufficiently addressed within the environmental evaluation submitted in support of the application. The AUC accepted that there will be no significant impacts on the environment given that the Project is entirely on disturbed land and horizontal directional drilling will be used for construction.  The AUC also accepted ATCO’s commitment to follow the recommendations presented in the environmental protection plan to reduce the risk of adverse environmental impacts. The AUC found that the noise impact assessment complies with Rule 012: Noise Control, and that the Project’s predicted noise level was below the permissible sound level, requiring no mitigation.

Project Need

The AUC found that ATCO’s business case supported the need for the Project given that an executed firm transportation delivery agreement existed between NOVA Gas Transmission LTD. (“NGTL”) and NGTL’s customer in the Edmonton area. Accordingly, the AUC found that ATCO demonstrated there is a need for the project and that the considered alternatives were not feasible for delivering natural gas to NGTL’s customer.

Project Costs

In assessing the need for the Project, one important component of the need assessment is the costs for the alternatives assessed by ATCO. The AUC’s task is not to determine whether the proposed costs are prudent but rather consider the estimated project costs to assess the reasonableness of the alternatives proposed as part of its overall assessment of whether approval of the preferred alternative is in the public interest.

ATCO estimated the total Project cost to be approximately $13,618,000, of which NGTL’s customer would pay $10,600,000 through a contribution in aid of construction. As a result, the total net cost to ATCO would be approximately $3,018,000. The AUC found that the Project was the only viable option that will provide the most effective means of delivering natural gas to NGTL’s customer.

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