Customers of Heritage Gas and/or Nova Scotia Power are waking up to a little good news today. Prices for natural gas — and as a result the electricity produced from it — will not be going up over the next two years as a result of an important decision released by the National Energy Board (NEB) last evening after stock markets closed in western Canada.
In the short term at least, the decision maintains the status quo for energy consumers in Nova Scotia and New Brunswick with respect to the cost of moving natural gas on the Maritimes & Northeast pipeline (M&NP). That pipeline was originally built to deliver Sable gas to Boston but increasingly runs the opposite direction, bringing fracked shale gas into the province.
According to evidence filed by the Maritimes pipeline, that transportation cost or toll was poised to jump between 30 and 100 per cent if the National Energy Board had allowed Irving Oil and other large industrial customers to shift their business to a rival pipeline called Emera Brunswick. That Emera-owned pipeline was offering the Irving refinery a $176 million discount over 13 years, despite the uncomfortable fact its subsidiary, NS Power, complained to the NEB that allowing that discount “was not in the public interest.”
Currently, Irving Oil is paying for one-third of the current contracted volume that moves through the Maritimes & Northeast Pipeline. Without that volume, rates for the rest of the flow — that is, the gas being used by consumers in Nova Scotia and New Brunswick — would have to rise to keep the pipeline viable.
(In Nova Scotia, a lawyer for the provincial regulator wondered aloud if NS Power ratepayers or Emera shareholders should pay the bill if the NEB were to approve higher transportation costs. Fortunately, that scenario has been avoided).
The Maritimes pipeline applied to the NEB for permission to offer the same discount to keep Irving as a major customer. NS Power and Heritage Gas both pointed out that if Irving Oil was permitted to shift its considerable volume to another pipeline, the transportation cost would rise at least 30 per cent among the remaining shippers. That would then be downloaded and charged to ratepayers and gas customers. Both companies pointed out that the NEB had approved a second pipeline in the region solely to deliver natural gas processed at the LNG Canaport facility in Saint John to markets south of the border — not to the Irving Oil refinery or other customers already being served by Maritimes Northeast.
Heritage Gas and Maritimes Northeast Pipeline testified the only winners of Emera’s proposed discount on the transportation toll would be Irving Oil (saving $176 million) and Repsol, the Canaport owner and only other customer on the Emera pipeline (saving $6 million).
In issuing its 17-page decision denying the discount, the National Energy Board noted the Emera Brunswick pipeline would require Board approval to reverse its flow to serve customers in the Maritimes. It made no reference to what would or would not be in the public interest. Here’s part of what the NEB decision did say:
The evidence indicates that splitting the domestic market demand between the two pipelines post-2019 may challenge the viability of M&NP, which, as a result, could affect the Maritime natural gas market unfavourably.
The Board recognizes that pipelines must adapt to changing conditions in their markets and that M&NP has proactively developed the proposal to respond to the perceived competition from Emera Brunswick pipeline. The Board views the Toll Application as a premature response that gives rise to significant concerns among affected parties. The Board denies the Application but it does so without making any determination as to whether the Toll would be just and reasonable.
In its submission to the NEB, Nova Scotia’s Department of Energy opposed the discount for Irving Oil and stated “in the short term, the Maritimes natural gas market will have to overcome serious obstacles to continue to develop and thrive.” Those obstacles include a lack of local supply due to no onshore production and the shutting down of offshore supply basins at Deep Panuke and Sable Island by 2020 — leaving consumers increasingly at the mercy of decisions by tribunals like this one.