Decision 25559-D01-2020

Imperial Oil Limited

Industrial System Designation for the Strathcona Refinery

July 27, 2020

Alberta Utilities Commission Decision 25559-D01-2020 Imperial Oil Limited Industrial System Designation for the Imperial Oil Strathcona Refinery Proceeding 25559 Application 25559-A001

July 27, 2020

Published by the: Utilities Commission Eau Claire Tower 1400, 600 Third Avenue S.W. Calgary, Alberta T2P 0G5

Telephone: 310-4AUC (310-4282) in Alberta 1-833-511-4AUC (1-833-511-4282) outside Alberta Email: [email protected] Website: www.auc.ab.ca

The Commission may, within 30 days of the date of this decision and without notice, correct typographical, spelling and calculation errors and other similar types of errors and post the corrected decision on its website.

Alberta Utilities Commission Calgary, Alberta

Imperial Oil Limited Decision 25559-D01-2020 Industrial System Designation for the Proceeding 25559 Imperial Oil Strathcona Refinery Application 25559-A001

1 Decision summary

1. In this decision, the Alberta Utilities Commission considers an application from Imperial Oil Limited for an industrial system designation at the Imperial Oil Strathcona Refinery. After consideration of the record of the proceeding, and for the reasons outlined in this decision, the Commission finds that the application meets the applicable requirements for an industrial system designation and that approval of the application is in the public interest.

2 Introduction and background

2. Imperial Oil Limited owns and operates a refinery at its Imperial Oil Strathcona Refinery industrial complex (Refinery) located in in the southwest quarter of Section 6, Township 53, Range 23, west of the Fourth Meridian, immediately east of the city of . Pursuant to Approval 24999-D02-2019,1 Imperial has approval to construct and operate a 43-megawatt (MW) cogeneration power plant (power plant) within the Refinery but it has not yet constructed the power plant.

3. On May 12, 2020, Imperial filed Application 25559-A001 with the Commission pursuant to Section 4 of the Hydro and Electric Energy Act, in which it requested an industrial system designation (ISD) encompassing all of Imperial’s facilities at the Refinery.

4. The industrial system would be comprised of the previously approved cogeneration power plant and the existing 13.8-kilovolt (kV) distribution system, both located within the Refinery.

5. AltaLink Management Ltd. filed a statement of intent to participate (SIP) but stated that it did not object to Imperial’s application and did not expect to actively participate in this proceeding.

6. The Commission received a SIP from the Consumers Coalition of Alberta (CCA) on June 17, 2020. The Commission denied standing to the CCA in a ruling issued on July 10, 2020.2

3 Discussion

7. The approved but not yet constructed cogeneration facility would include a gas turbine generator that would provide 43 MW of power to the Refinery and a heat-recovery steam generator that would create steam to be used in the Refinery’s industrial operations. Imperial

1 Power Plant Approval 24999-D02-2019, Proceeding 24999, Application 24999-A001, October 29, 2019. 2 Exhibit 25559-X0019, AUC Ruling on standing, July 10, 2020.

Decision 25559-D01-2020 (July 27, 2020) 1 Industrial System Designation for the Imperial Oil Strathcona Refinery Imperial Oil Limited

stated that the majority of the fuel supply for the gas turbine would be produced on-site from its industrial operations. Imperial also stated that the Refinery currently produces steam from fuel gas and carbon monoxide boilers, however, it intends to recover the exhaust heat from the power plant to supply up to 50 per cent of the high pressure steam required by the Refinery’s industrial operations.

8. Imperial stated that the Refinery will contain the cogeneration power plant, the main refinery area and several tank farms owned and operated by Imperial, and that there are no third party companies operating on-site. The industrial operations include:

i. primary separation of various grades of oil through atmospheric and vacuum distillations ii. catalytic reforming which removes the octane value of the naptha fraction iii. fluid catalytic cracking that converts high boiling gas oils into gasoline and diesel iv. naptha hydrotreating to remove sulphur and nitrogen compounds from gasoline v. diesel hydrotreating to remove sulphur and nitrogen compounds from diesel vi. hydrofluoric acid alkylation to convert propane and butane into gasoline components vii. rain water impounding basins and effluent treatment

9. Imperial stated that it owns and operates the Refinery’s 13.8-kV substation and distribution system which is currently supplied from AltaLink’s Imperial Oil Edmonton 95S Substation. Imperial stated that the on-site substation is fed from AltaLink’s East Edmonton 38S Substation, which is heavily utilized due to the large residential and industrial demand in the area. Imperial submitted that any load displacement project, such as the power plant, would have added benefit of relieving congestion on transmission lines and providing voltage support to the regional transmission system.

10. Imperial stated that the power plant would produce 43 MW of the 53 MW Refinery load and that Imperial would only export power to the Alberta Interconnected Electric System (AIES) in rare, unplanned and transient operations such as when major oil refining process units shutdown unexpectedly. Imperial stated that there would be no change to the current demand transmission service agreement that it has with the Alberta Electric System Operator.

11. Imperial submitted that the power plant would reduce the amount of power imported from the AIES and that there would be no changes to the on-site distribution system aside from the power plant’s connection to the 13.8-kV substation. In addition, it stated that the steam generation facilities would improve the Refinery’s energy efficiencies, decrease costs associated with the manufacturing of petroleum products and reduce the downtime of the Refinery. It added that steam generation from the power plant would allow Imperial to shut down one of its on-site boilers. Imperial stated that it expects costs reductions of up to four million dollars annually for reduced boiler maintenance and approximately 32 million dollars for reduced energy purchase from the AIES.

12. Imperial stated that it conducted a full participant involvement program when it submitted the previously-approved power plant application and that it did not update its program for this application.

Decision 25559-D01-2020 (July 27, 2020) 2 Industrial System Designation for the Imperial Oil Strathcona Refinery Imperial Oil Limited

4 Commission findings

13. The Commission must consider the ISD application in accordance with the principles and criteria set out in Section 4 of the Hydro and Electric Energy Act. Subsection 4(3) sets out specific criteria for determining whether a project should be designated as an industrial system.

14. Subsection 4(2) lists the principles the Commission must consider:

• The ISD must be consistent with the objective of giving appropriate economic signals such that industrial processes will develop their own internal electricity supply where that is the most economical source of generation.

• The ISD must support the efficient exchange of electric energy that is in excess of the industrial system’s own requirements with the interconnected electric system and improve voltage stability and reduction of losses and congestion of transmission lines.

• The ISD should not facilitate “the development of independent electric systems that attempt to avoid costs associated with the interconnected electric system” and uneconomical bypass of the interconnected electric system.

• Duplication of the interconnected electric system must be avoided where it is more economical to use utility-owned transmission or distribution facilities existing in the service area where the industrial system will be located.

15. The Commission is satisfied that approval of the project is consistent with the principles set out above. Having reviewed the economics of the project the Commission finds that Imperial’s proposal to use an internal supply of generation represents the most economical source of generation. While Imperial asserted that it rarely proposes to exchange excess electricity given its internal process and electricity requirements, the Commission is satisfied that the proposed ISD will support such an exchange with the interconnected system.

16. The Commission also accepts Imperial’s submission that the project will help reduce congestion of AltaLink’s East Edmonton 38S Substation and associated transmission lines while improving the region’s voltage stability.

17. Finally, the Commission finds that the project will supply a substantial portion of the Refinery’s energy requirement while utilizing Imperial’s existing distribution system and that approval of the proposed ISD will not result in an uneconomical by-pass of the AIES.

18. The Commission also considered the project in light of the criteria found in Subsection 4(3) of the Hydro and Electric Energy Act, reproduced below.

(3) The Commission may make a designation under subsection (1) if the Commission is satisfied that all of the following criteria have been met:

(a) the electric system includes a generating unit located on the property of the one or more industrial operations it is intended to serve, there is a high degree of integration of the electric system with one or more industrial operations the electric system forms part of and serves, and there is a high degree of integration of the components of the industrial operations;

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(b) the industrial operations process a feedstock, produce a primary product or manufacture a product;

(c) there is a common ownership of all of the components of the industrial operations;

(d) the whole of the output of each component within the industrial operation is used by that operation and is necessary to constitute its final products;

(e) there is a high degree of integration of the management of the components and processes of the industrial operations;

(f) the application to the Commission for a designation under subsection (1) demonstrates significant investment in both the expansion or extension of the industrial operations processes and the development of the electricity supply;

(g) where an industrial operation extends beyond contiguous property, the owner of the industrial operation satisfies the Commission that the overall cost of providing the owner’s own distribution or transmission facilities to interconnect the integral parts of the industrial operation is equal to or less than the tariffs applicable for distribution or transmission in the service area where the industrial operation is located.

19. The Commission is satisfied that Subsection 4(3)(a) has been met. As mentioned above, the Refinery will include a previously-approved generating unit in the form of a cogeneration power plant that will produce electricity and steam to be used in the industrial operations of the Refinery. Subsection 4(3)(b) has also been met because the industrial operations utilize several raw materials to produce various petroleum products.

20. Imperial will be the sole owner of all the components of the industrial operation. The Commission therefore finds that Subsection 4(3)(c) has been met.

21. Under normal operating conditions, both the electric energy and steam produced by the power plant will be used entirely by Imperial’s industrial operation and each is necessary for Imperial to create its final products. The Commission is satisfied that power will be exported to the AIES only in operational downtime, including planned or unplanned circumstances where the system’s normal operations are disrupted or curtailed. Based on the Commission’s review of the application, in particular the process flow diagram, the Commission is satisfied that the outputs of the components of the industrial operation will be used by the industrial operation, and that Subsection 4(3)(d) has been met.

22. The Commission finds that Subsection 4(3)(e) has been met as Imperial owns and operates both the power plant and the Refinery. Hence, there is a high degree of integration of management of both the components and the processes of the industrial operations.

23. The Commission finds that the cogeneration power plant demonstrates a significant investment and represents both an extension of Imperial’s industrial operations processes and additional development of the electricity supply. Accordingly, Subsection 4(3)(f) has been met.

24. The Commission finds that Subsection 4(3)(g) is not applicable because the industrial operations do not extend beyond the Refinery’s contiguous property.

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25. Subsections 4(4) and 4(5) set out further criteria for the Commission to consider when it is not satisfied that a project meets certain of the criteria set out in Subsection 4(3). Because the Commission is satisfied that the project meets the criteria set out in Subsection 4(3) it is unnecessary to assess the project pursuant to the further criteria set out in subsections 4(4) and 4(5).

26. The Commission considers that a comprehensive participant involvement program was not required because approval of the application would not materially alter the operation of the Refinery or otherwise affect any other person’s rights beyond what Imperial would have notified and consulted on when it conducted its participant involvement program for its power plant application.

27. Having considered the applicable principles and criteria set out in Section 4 of the Hydro and Electric Energy Act, the Commission finds that Imperial’s proposal meets all the requirements for an ISD.

5 Decision

28. Pursuant to Section 4 of the Hydro and Electric Energy Act and sections 2(1)(d) and 117 of the Electric Utilities Act, the Commission approves the application and grants to Imperial an industrial system designation as set out in Appendix 1– Industrial System Designation Order 25559-D02-2020 – July 27, 2020 (Appendix 1 will be distributed separately).

Dated on July 27, 2020.

Alberta Utilities Commission

(original signed by)

Neil Jamieson Commission Member

Decision 25559-D01-2020 (July 27, 2020) 5