Ontario Utilities, Fertilizer Manufacturers Seek Fast-Track for More U.S. Shale Gas Imports

Gordon Jaremko for the NGI Gas Market Report

[Note: this article is an uncritical account of industry demands, plans, and so on.]

A C$2.3 billion (US$2.1 billion) and growing lineup of pipeline and industrial projects has formed in Ontario and Quebec for further increases in Canadian imports of shale gas from the eastern United States.

Demand for U.S. exports also shows signs of spreading farther east into Canada’s maritime provinces, where gas users have for the first time put in bids for capacity on planned additions to the delivery network. And going even further east a cooperative of 50 million farmers from India is looking to set up a fertilizer plant in Quebec for exports through the St. Lawrence Seaway.

The lineup is described by requests for swift approval of an agreement to expand import conduits between TransCanada Corp. and the nation’s three biggest distribution systems: Union Gas (Spectra), Enbridge Gas Distribution in Ontario, and Quebec’s Gaz Metro.

A procedural ruling, which threatens to delay the service improvements, triggered the demands for action. The National Energy Board (NEB) raised the possibility of a months- or even years-long regulatory review.

After a four-month round of lawyers’ letters and study, the NEB classified the agreement approval request as an application for a new tariff and toll regime that requires public hearings. TransCanada and the distributors sought use of a much faster procedure for ratifying service and rate settlements between pipelines and shippers.

The Ontario and Quebec package, filed with the NEB just before Christmas, aims to accelerate imports of U.S. shale gas that already doubled in just six years to about 2.5 Bcf/d or 75% of current central Canadian consumption.

Although a mid-2013 restructuring decision by the NEB slowed the pace of import growth by cutting tolls on TransCanada’s national Mainline, low-cost U.S. gas from the Marcellus and Utica shale formations remains a hot item in Ontario and Quebec.

The calls for swift action by the NEB point out that U.S. exports only have to travel 10% as far as Mainline deliveries from Alberta, and that all Ontario and Quebec gas users have strong interests in access to diverse, competing supply sources.

The biggest new buyer identified to date is a project by an alliance of 50 million farmers in India and manufacturers that is promising to turn Quebec into an international-scale maker and exporter of fertilizers. Entreprise IFFCO Canada Ltee., a subsidiary of Indian Farmers Fertilizers Co-operative Ltd., is proposing to build a C$1.2 billion (US$1.1 billion) plant at Becancour, a year-round port for seagoing vessels on the south shore of the St. Lawrence River.

The project requires about 80 MMcf/d of low-cost shale gas as well as up to 1,500 construction workers then 250 permanent staff to operate the plant, IFFCO Canada has told the NEB.

In the Ontario and Quebec gas transportation network, Union and Enbridge alone have secured support and provincial approvals for C$1.1 billion (US$990 million) in new pipeline capacity for about 1.1 Bcf/d.

The new gas volumes would be largely — and possibly, entirely — U.S. shale production exports that go north to the Dawn storage and trading hub in southern Ontario via border crossings from Michigan and New York state near Sarnia and Niagara Falls.

TransCanada is preparing two more pipeline projects for construction applications later this year: King’s North as its share in the co-operative package with Union, Enbridge and Gaz Metro; and Trillium, a freshly minted name for further additions needed to make up for gas capacity losses in the proposed Energy East partial conversion of the national Mainline to oil service.

The agreement with the Ontario and Quebec distributors has “the express goal of enabling the immediate addition of facilities that are urgently required…to meet immediate market demands,” TransCanada has told the NEB.

Union reports obtaining approval from the Ontario Energy Board to diversify gas sources by switching away from traditional long-distance deliveries from Alberta and over to Dawn for nearby purchases and short pipeline hauls.

In addition the southern Ontario distributor has told the NEB that the Canadian taste for U.S. shale production that competes with old mainstay Alberta supplies shows signs of spreading as plans for delivery service additions evolve.

In capacity auctions to recruit support for installing new pipe and compressors, “It is important to note that Union received, for the first time, bids for service from customers in the Maritime Provinces as well as for significant new industrial customer loads located in Ontario and Quebec. Union has also offered a Dawn-based service to industrial customers in northern and eastern Ontario starting in 2016.”

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