Advancing British Columbia’s Natural Gas Market Opportunities – An Interview with Michael Mulcahy, President and CEO of FortisBC

Egan: You are relatively new to your role at FortisBC – looking out over the next year, what are some of your major corporate priorities.

Mulcahy: This is an exciting time at FortisBC. We have a great company with great employees. As we look out over the next years, our key priorities are focused around our customers, system integrity and safety and executing on our growth opportunities.

We are dedicated to challenging the status quo in order to provide better customer service. In the past few years, we implemented an initiative of working closer to our customers through regionalization, which entails moving the business closer to our customers. Relocating specific business groups enables regional teams to make more front-line decisions, collaborate locally and provide customized customer service.

It was also a busy year on the regulatory front. We obtained the British Columbia Utilities Commission’s (BCUC) approval to proceed with the $256 million Lower Mainland Intermediate Pressure System Upgrade (LMIPSU) project. Project construction will begin in 2018 and result in the replacement of more than 20 kilometers of intermediate pressure gas line that is either nearing the end of its useful life or requiring seismic upgrades. This will ensure continued safe, reliable delivery of natural gas to our customers in the Lower Mainland.

Another initiative we continue to pursue is making it easier for customers and the public to do business with us. In 2015, we revised a number of our current customer connection policies and anticipate a decision from the BCUC in 2016. If successful, this will allow prospective customers to connect to our system at no cost.

Finally, the Tilbury Island liquefied natural gas (LNG) facility expansion in Delta has entered its second year of construction. The expanded facility will serve the growing need for natural gas for transportation, and the project itself has led to substantial job creation and a benefit to the local economy.

“Many people think of LNG as new, however, FortisBC has owned and operated the LNG facility at Tilbury Island since 1971.” Image curtesy of FortisBC

“Many people think of LNG as new, however, FortisBC has owned and operated the LNG facility at Tilbury Island since 1971.” Image curtesy of FortisBC

Egan: FortisBC has owned and operated LNG facilities in British Columbia for many years and you are now moving forward with expansions of these facilities. What are the LNG market opportunities here in British Columbia that you are pursuing?

Mulcahy: Many people think of LNG as new, however, FortisBC has owned and operated the LNG facility at Tilbury Island since 1971. Since then, we have seen opportunities to expand how we can use LNG, particularly around transportation and remote community power generation. In 2015, BC Ferries announced their three new vessels would be fuelled with LNG from FortisBC, and Teck Resources implemented a pilot project to convert six mine haul trucks to LNG We continue to work with the transportation industry to find solutions that work for them – which can save 20 to 40 per cent in fuel costs compared to diesel and reduce greenhouse gas emissions on a lifecycle basis by 15 to 25 per cent compared to gasoline or diesel. We believe LNG can enable British Columbia’s businesses to enhance their competitiveness and assist the province to meet its climate initiatives.

Egan: What about LNG export market opportunities – is FortisBC pursuing any export projects?

Mulcahy: We’re exploring a potential additional expansion at Tilbury to the one currently underway. Hawaii Electric is interested in LNG supplied from Tilbury to help the islands transition off their dependency on imported oil-fueled power generation. Leaders there have committed to aggressive renewable energy goals including a shift to 100 per cent renewables by 2045. Hawaii Electric believes natural gas could be a good fuel solution as a bridge to that goal. We signed a conditional supply agreement that is still subject to corporate and regulatory approvals in British Columbia and Hawaii.

Egan: Developing an LNG export industry in British Columbia is a major priority for the natural gas industry and a major priority of the provincial government. Do you think the challenges around commodity markets (low oil and natural gas prices), approvals required, public acceptance etc. are insurmountable?

Mulcahy: It is true that there are challenges in developing a new export industry like LNG. We’ve been successful in this province at delivering projects for many years. The key to success is working with stakeholders, government, regulators and First Nations in order to find an effective solution that benefits all parties. Those that will be successful will find this balance and we’ve had good success in the expansion of our LNG project at Tilbury for example. LNG is a clean energy solution and it can be stored and transported safety. It can provides an economical path to cleaner forms of energy not only domestically but also for the world.

On the commodity side it is important to remember that LNG is still lower in price than the wholesale price of diesel. LNG also has other benefits including a 15 to 25 per cent reduction in greenhouse gas emissions over diesel and is cleaner, with less particulate matter. It is for these reasons FortisBC believes LNG remains an attractive energy solution for British Columbia and beyond.

Egan: FortisBC has worked with BC Ferries and a number of truck fleet owners helping them move from diesel to LNG or CNG fueling. Using natural gas as a transportation fuel is a market that is moving forward in British Columbia more so than in other jurisdictions. Why do you think that is – is it FortisBC incentives, provincial government policy directives, something else?

“In 2012, FortisBC announced an incentive program for fleet operators to offset part of the cost for a natural gas engine over a diesel engine.” Image curtesy of BC Ferries

“In 2012, FortisBC announced an incentive program for fleet operators to offset part of the cost for a natural gas engine over a diesel engine.” Image curtesy of BC Ferries

Mulcahy: The key to success is working with policy makers and seeking opportunities to find solutions that work not only for them but for customers as well. Following the creation of the Government of British Columbia’s Greenhouse Gas Reduction regulation in 2012, FortisBC announced an incentive program for fleet operators to offset part of the cost for a natural gas engine over a diesel engine. We also focus on providing ongoing service to our customers through owning the fueling infrastructure and providing technical support to them during the fuel transition. Since then, FortisBC has contributed nearly $30 million in incentives to help companies convert vehicles to run on natural gas, including Seaspan Ferries and BC Ferries which both announced the construction of LNG ferries; some of the first marine vessels of their kind in Canada.   We’ve been fortunate to have the leadership and policy support from the province of British Columbia that enables delivery of the program, so it’s really a combination of both policy and the program we created.

“FortisBC is the first utility in North America to directly distribute renewable natural gas to its customers.”

Egan: Another area FortisBC has moved forward with Renewable Natural Gas (RNG) projects. How is FortisBC making use of RNG in its distribution system – what are the benefits? Do you see more RNG projects going forward in British Columbia and across Canada?

Mulcahy: FortisBC is the first utility in North America to directly distribute renewable natural gas to its customers. Enabling this offer had its challenges. We listened to both potential customers and suppliers to see what would fit best here in British Columbia. What we heard is that there were customers – both residential and commercial, throughout the province who would like a renewable natural gas option. But what we heard from suppliers is that cost is an issue in bringing these projects to market. However, having access to our network of customers at a reasonable cost was important for the viability of the industry.

The RNG Program bridges those interests and continues to grow. In 2014, we introduced an option that allows customers the ability to select the amount of RNG they subscribe to – anywhere from five to 100 per cent. It allows customers to continue to use their natural gas equipment while lowering their greenhouse gas (GHG) footprint. RNG can be used in any application where natural gas service exists, including some of the emerging transportation programs we’ve discussed. In fact, the City of Surrey is looking to fuel a garbage collection fleet with RNG from their proposed digester through our system and Compressed Natural Gas (CNG) fueling infrastructure.

On the supply front, we continue to receive expressions of interest for biogas and biomethane supply projects. We are evaluating these potential supply projects and will work with suppliers to determine if we can upgrade biomethane at their site to utility-ready renewable natural gas.

FortisBC has received approval from the BC Utilities Commission for four additional renewable natural gas purchase agreements in addition to the ones already up and running. These agreements will result in new renewable gas production facilities located in three Lower Mainland municipalities. The projects that are expected to proceed over the next few years and include: Seabreeze Farm in Delta, Dicklands Farm in Chilliwack and the Lulu Island Wastewater Treatment Plant in Richmond.

“RNG can be used in any application where natural gas service exists, including some of the emerging transportation programs.”

“RNG can be used in any application where natural gas service exists, including some of the emerging transportation programs.”

While the total supply is still fairly modest we believe that we’ve been able to show that it is a viable form of renewable energy and something that can be part of transitioning to a lower carbon world.

Egan: You are the new Chair of the Canadian Gas Association – what do you think some of the major challenges facing the natural gas distribution industry are?

Mulcahy: The natural gas industry has a long history of supporting innovation and this can play a pivotal role in helping Canada achieve its environmental goals. Looking at appliance efficiency, for example, over the last 20 years we’ve transitioned to a situation where natural gas for space and water heating can achieve better than 95 per cent efficiency. In fact, in British Columbia all new furnaces must be better than 95 per cent efficient.

Natural gas is inherently a cleaner burning fuel than many other alternatives we have today, and it is an economical choice. That is the challenge that we have: introducing measures that improve emissions while at the same time doing it in an economical way. Natural gas provides this path. Through emerging natural gas technologies in transportation and renewable natural gas, as well as efficient direct use of natural gas, natural gas utilities throughout the country can find solutions that help meet Canada’s economic and environmental objectives.