NATIONAL ENERGY BOARD
IN THE MATTER OF the National Energy Board Act, R.S.C. 1985, c. N-7, as amended (NEB Act), and the regulations made thereunder;
IN THE MATTER OF the Canadian Environmental Assessment Act, 2012, S.C. 2012, c. 37, as amended, and the regulations made thereunder;
IN THE MATTER OF an application by NOVA Gas Transmission Ltd. for a Certificate of Public Convenience and Necessity and other related approvals pursuant to Part Ill and Part IV of the NEB Act;
AND IN THE MATTER OF National Energy Board Hearing Order GH-003-2018.
WRITTEN EVIDENCE
OF
TRANSGAS LIMITED
To: Ms. Sheri Young Secretary of the Board National Energy Board Suite 210, 517 Tenth Avenue SW Calgary, Alberta T2R 0A8
April 18, 2019 . INTRODUCTION
1. TransGas Limited (TransGas) submits this written evidence in support of the application' by NOVA Gas Transmission Limited (NGTL) for National Energy Board (NEB or Board) approval to construct and operate the 2021 NGTL System Expansion Project (Project).
2. As the provincial utility solely responsible for transporting natural gas in Saskatchewan, TransGas has executed long-term contracts with NGTL for firm delivery transportation service (Delivery Service) associated with the Project. TransGas requires this service to respond to shifting market dynamics in Saskatchewan, specifically, increasing customer demand and decreasing intra- Saskatchewan natural gas supply.
3. The majority of TransGas System supply is obtained from the NGTL System,2 with TransGas currently holding firm delivery capacity of 739 TJ/d to meet existing customer demand. Forecasts show, however, that by 2021, TransGas' existing NGTL System delivery capacity will be insufficient to meet the growing demand on the TransGas System.
4. Long-term firm delivery service on the NGTL System (along with corresponding transportation service on interconnecting pipeline systems) allows TransGas to provide reliable and consistent service to its customers. Incremental NGTL System service is necessary for TransGas to meet customer demand and is urgently needed to respond to changing market dynamics in Saskatchewan.
5. Capacity associated with the Project, in particular, is a critical element of TransGas' long-term planning and its ability to meet the demand of consumers in Saskatchewan. TransGas supports the NGTL position on Project need and respectfully requests that the Board approve the Application as filed to facilitate an April 1, 2021 in service date.
II. OVERVIEW OF TRANSGAS BUSINESS
A. Transportation Service on the TransGas System
6. TransGas is a wholly-owned subsidiary of SaskEnergy Incorporated (SaskEnergy), a provincial Crown corporation.3
7. Pursuant to The SaskEnergy Act,4 TransGas holds the exclusive right to transport natural gas in Saskatchewan. The integrated pipeline system owned and operated by TransGas consists of a network of more than 15,000 km of natural gas pipelines (the TransGas System).5 TransGas also owns and operates natural gas storage and gathering facilities, which are integrated with the TransGas System.
1 NOVA Gas Transmission Limited, Application for the 2021 NGTL System Expansion Project, NEB Exhibit A92619 (NGTL Application). 2 Via physical interconnections with the TransCanada Mainline (Mainline), the Foothills System and Many Island Pipe Lines (Canada) Limited (MIPL)).
3 SaskEnergy, a provincial Crown corporation, has the exclusive legislated franchise to distribute natural gas within the province of Saskatchewan. In addition to TransGas, MIPL is a wholly-owned subsidiary of SaskEnergy.
4 SS 1992, c S-35.1, s 60.
5 TransGas, Our Company, online:
8. The TransGas System interconnects with SaskEnergy's 70,000 km of distribution lines at numerous locations within Saskatchewan and is the primary source of natural gas supply for the SaskEnergy distribution system.° The natural gas supplied by TransGas to SaskEnergy is used to serve 93% of Saskatchewan communities and deliver natural gas to more than 396,000 residential,' farm, commercial and industrial customers. SaskEnergy serves 17 cities, 150 towns, 313 rural regions, 59 Indigenous communities° and 161 villages in the province.
B. Operation of the TransGas System
9. TransGas offers firm and interruptible receipt and delivery transportation service on the TransGas System through the TransGas Energy Pool (TEP), a notional energy pool model, under the terms of the TransGas Comprehensive Tariff.9 Under this regime, TransGas receipt customers hold contracts on the TransGas System to get gas to TEP and TransGas delivery customers hold contracts on the TransGas System to get gas from TEP to a physical delivery point. There are currently more than 1,200 receipt and delivery points on the TransGas System, representing 119 transportation and storage customers within the province.10
10. TransGas operations related to western supply are generally undertaken through transportation service from the NOVA Inventory Transfer (NIT) market hub to TEP, known as "NIT to TEP". Under NIT to TEP, TransGas contracts for delivery service on the NGTL System at NIT to notionally move aggregate natural gas supply onto the TransGas System to TEP.
11. TransGas relies on its NIT to TEP delivery commitments to contract for physical delivery of gas to specific points off of interconnecting pipeline systems, being the Mainline, MIPL and/or the Foothills System. A map of the TransGas System and interconnecting pipelines is attached at Appendix A.11 Relevant to the NGTL Application, the Mainline and the Foothills System are connected to the NGTL System via the East Gate export point (EGAT).12
12. As the exclusive natural gas transporter in Saskatchewan, TransGas' general practice is to contract with interconnecting import pipeline systems on behalf of its customers. This streamlines contracting for both the customer and TransGas and is a critical aspect of TransGas' operations.
13. As set out below, demand in Saskatchewan is forecast to continue increasing in the long term while intra-Saskatchewan natural gas production is expected to continue to decline. The only practical option for TransGas to reliably meet the needs of its customers is to increase natural gas imports via delivery service on the NGTL System.
6 SaskEnergy, a provincial Crown corporation, has the exclusive legislated franchise to distribute natural gas within the province of Saskatchewan. TransGas and MIPL are wholly-owned subsidiaries of SaskEnergy. Approximately 82% of consumers in Saskatchewan have selected natural gas as their fuel source for home heating.
8 The 59 Indigenous communities served by SaskEnergy have a total of approximately 250 on-reserve businesses, including construction, retail, information technology, banking and entertainment businesses.
9 TransGas Tariff, online:
12 EGAT consists of the Empress and McNeill export delivery locations (NGTL Application, PDF page 56) and is shown in the map attached at Appendix A as "Empress." - 3 -
III. TRANSGAS SYSTEM — MARKET DYNAMICS
14. The following provides an overview of the market dynamics facing the TransGas System that, independently and in combination, support Project need from TransGas' perspective.
A. Increasing Saskatchewan Natural Gas Demand
15. Since 2010, demand for delivery of natural gas in Saskatchewan has increased by over 70% and TransGas forecasts that delivery demand could grow by an additional 10% by 2022.13 The expected increase in natural gas demand is tied in large part to the needs of large industrial customers, particularly those engaged in electricity generation. These customers currently hold contracts for the delivery of a significant portion of natural gas transported on the TransGas System, and are expected to require additional supply by 2022 and beyond.
16. For example, SaskPower (the primary producer of electricity in the province and one of TransGas' largest industrial customers) currently holds a material proportion of the total firm capacity on the TransGas System. TransGas understands that SaskPower plans to commission its 350 MW natural gas-fired Chinook Power Plant before the end of 2019,14 and to develop a similar facility in the Moose Jaw area.15 These projects will significantly increase SaskPower's firm service requirements on the TransGas System. By way of comparison, TransGas understands that the Chinook Power Plant is expected to consume approximately four times as much natural gas as the neighbouring city of Swift Current on a peak winter day.
17. The electricity generation sector in Saskatchewan is currently required to limit greenhouse gas emissions to levels established in concert with the federal government.16 Achieving these emissions reduction targets will require the phase-out of certain coal-fired electricity generation facilities. SaskPower17 will determine the appropriate supply options to continue to serve its customers, however, long-term estimates developed by TransGas indicate that by 2030 natural gas electricity generation could increase by as much as 100% relative to current levels. To the extent that generators choose to increase the use of natural gas as a fuel source, TransGas will require additional supply volumes to meet that demand. Given the decline in intra-provincial supply (discussed below), supply from outside Saskatchewan will be required.
18. The nature of demand in Saskatchewan reflects the circumstances described in the NGTL Application, which identifies electricity generation from natural gas as a significant source of increased export demand at EGAT.18
13 TransGas forecasts referenced herein have been developed having regard to confidential future-dated contracts that TransGas has executed with its customers, as well as the confidential outcome of recent non-binding open seasons for service on the TransGas System.
14 SaskPower, News Releases: Chinook Power Station Reaches Important Milestones (August 15, 2018), online:
B. Declining Saskatchewan Natural Gas Supply
19. As demand for natural gas within Saskatchewan is increasing, natural gas production within Saskatchewan is declining.
20. Natural gas supply on the TransGas System has historically been sourced from (1) production within Saskatchewan and (2) volumes physically received through pipeline interconnections, primarily coming from the NGTL System through the Mainline, MIPL and the Foothills System (supported by delivery contracts on the NGTL System at NIT).
21. TransGas cannot rely on local production to supply existing or growing customer demand as natural gas reserves are generally in decline throughout Saskatchewan. As set out in the NEB's Provincial and Territorial Energy Profile for Saskatchewan, the province represented only 3% of total Canadian natural gas production in 2017.19 In contrast, natural gas production in British Columbia and Alberta, including in the Peace River Area, accounted for 29% and 67%, respectively of Canadian natural gas production that year.2°
22. As depicted in Figure 1 below, natural gas production in Saskatchewan has been in decline for approximately the last ten years. The number of natural gas wells drilled in Saskatchewan has decreased significantly since 2010 and between 2015 and September 30, 2018, only four new natural gas wells were drilled/forecast to be drilled in the province.
WELL DRILLING IN SASKATCHEWAN September 30, 2018
171, mse
110.
2529 0
1431 ram
'SOO
I I
/01.5 F016
/017 &MIMI( .71C7l1 Tral3G811 20IS onvost 2933 bum.- towroune•onj 3oakcallerwom3ed 4 .0.,1 Figure 1: Well Drilling in Saskatchewan21
of this growth is expected to come from the electrical generation sector which accounts for 60% of this increase in projected demand. 19 NEB, Provincial and Territorial Energy Profiles — Saskatchewan, online:
23. As depicted in Figure 2, Saskatchewan has been a net importer of natural gas since 2010. CHANGE IN SASK SUPPLY & DEMAND
450 NET 400 IMPORTER NET EXPORTER — STEADY SUPPLY NET IMPORTER
350 0
300 (Pi)
250 Volume 200 ALBERTA SUPPLY Annual 150
100
50
0 1982 1987 1992 1997 2002 2007 2012 2017 2022 Saskatchewan Supply Saskatchewan Load Figure 2: Natural gas supply and demand in Saskatchewan22
24. The majority of TransGas System supply is, therefore, obtained extra-provincially, primarily from the NGTL System on which TransGas currently holds total firm delivery capacity of 739 TJ/d. TransGas also holds corresponding firm contracts for downstream natural gas transportation on the Mainline and the Foothills System.23 All volumes currently contracted by TransGas on the NGTL System are used to fulfill existing contracts with customers for firm NIT to TEP service.
25. TransGas forecasts that by April 2021, its NIT to TEP contracts will increase to approximately 910 TJ/d, meaning that the current level of contracting on the NGTL System will be insufficient to meet future needs. Indeed, to meet anticipated future demand, TransGas has, to date, contracted on a long-term basis for an aggregate of approximately 400 TJ/d of incremental delivery capacity on the NGTL System from 2018 to 2022, a portion of which will be served by the Project.
26. As a prudent operator, TransGas must be able to serve peak demand with minimal curtailment. Firm service on the NGTL System and interconnecting pipeline systems is the most efficient and commercially viable way for TransGas to ensure reliable service to its (and by extension, SaskEnergy) customers. Entering into long-term firm contracts with NGTL and interconnecting pipeline operators will help ensure consistently available service and cost certainty for TransGas and its customers as demand grows.
IV. TRANSGAS NEED FOR THE PROJECT AND REQUIRED TIMING
27. Growing delivery demand and decreasing Saskatchewan production have both caused the TransGas System to become increasingly constrained.
28. Based on the supply and demand factors described above, TransGas will not be able to continue to meet current delivery requirements and respond to anticipated future demand absent incremental extra-provincial supply.
22 The information depicted in Figure 2 is current as of April 2, 2019.
23 As well as on MIPL. -6-
29. To obtain the volume of NIT supply required to avoid this outcome and to ensure consistent and reliable service for TransGas customers and the Saskatchewan public more generally, TransGas has bid for Delivery Service in recent NGTL open seasons held for export capacity. Relative to the Project, this includes the binding open season for expansion capacity that closed in January 2018 (Open Season).24
30. The Open Season made 985 TJ/d of expansion capacity available for export at EGAT, with the Project targeted to come into service on April 1, 2021.25 TransGas was one of 12 bidders awarded long-term Delivery Service associated with the Project in the Open Season.26 As set out in the NGTL Application,27 successful bidders require service commencing April 1, 2021 and TransGas is no exception.
31. From the TransGas perspective, the Project is the only sustainable, reasonable and commercially prudent solution to help resolve the supply and demand dynamics in Saskatchewan and is needed to ensure uninterrupted natural gas service to TransGas customers and the Saskatchewan public more generally.
V. CONCLUSION AND REQESTED RELIEF
32. The Project is a critical component of TransGas' long-term plan to satisfy current and growing natural gas demand in Saskatchewan. Denial of the Application or a significant delay in the Board's approval of the Application would have real impacts on TransGas' ability to serve its customers, including SaskEnergy (and, by extension, SaskEnergy's industrial, commercial, farm and residential customers in Saskatchewan).
33. TransGas, therefore, respectfully requests that the Board approve the NGTL Application as filed.
ALL OF WHICH IS RESPECTFULLY SUBMITTED this 18th day of April, 2019.
BLAKE, CASSELS & GRAYDON LLP
Per: cgr- Katie Slipp Counsel for TransGas Limited
24 NGTL, NGTL Empress and McNeill Border FT-D1 Open Season, December 18, 2017 Notice, online:
25 NGTL Application, PDF 82.
26 NGTL Application, Appendix 5-8; PDF page 83.
27 NGTL Application, PDF 44, 55, 57, 82, 84. APPENDIX A
TRANSGAS SYSTEM MAP
TransGas
LEGEND - 6. AND LARGER TRANSMISSION • COMPRESSOR STATION — 4" AND SMALLER TRANSMISSION MIPL PIPELINE ♦ STORAGE FACILITY ♦ THIRD PARTY STORAGE
La Ronge
Beacon Hill
Prince, Albert
North St. Louis Battleford Melfort
Warman Asquith Prud'homme Saskatoon
-Yorkton
Lorebum
Empress Melville
Tantallon
Belle Plaine Moosomin Hatton • • AI 11 •
Foothills • Estevan
HAVRE WBI