Heritage Gas, Providing Nova Scotia with a Clean and Affordable Energy Solution

When Nova Scotia utility Heritage Gas launched in 2003, it had one customer and a vast amount of accessible, offshore natural gas to draw on.

Today, the Dartmouth-based natural gas distribution company has more than 7,000 customers which are evenly split between commercial and residential.  A subsidiary of Alberta’s AltaGas Ltd., Heritage Gas supplies the province’s largest hospitals and educational institutions, industries and businesses with natural gas, and has a growing base of residential customers.

Despite starting a greenfield gas utility with urban centres founded on bedrock – laying pipelines is not cheap – Heritage Gas has been very successful. And it is preparing to build on that success and to continue to provide reliable, low-cost natural gas to the province, despite dramatically changing supply and pricing environments.

Two of the largest challenges the company currently faces are securing stable, long-term supply as offshore volumes dissipate and keeping costs competitive, says President John Hawkins.  “Originally, with the Sable Offshore Energy Project, and more recently the Deep Panuke Offshore Project, Heritage Gas was sitting on a huge supply of gas in our backyard. As supply has been falling off, demand here in Nova Scotia and in the Maritimes has been increasing.”  Both Sable and Deep Panuke are expected to shut down by 2020.  The decline in supply from the offshore Nova Scotia fields has led Heritage Gas to take a number of actions to ensure that its customers have access to stable and reliable supplies of natural gas. In the short-term, for example, this past winter 60 per cent of the gas purchased by Heritage Gas for its customers came from western Canada. Even with transportation costs, it was less expensive than closer U.S. sources priced for the premium New England markets, Hawkins said.

As part of its longer-term plan the utility has made several significant commitments including entering into two long-term shipping contracts and entering into a long-term contract for storage services.

“This past winter 60 per cent of the gas purchased by Heritage Gas for its customers came from western Canada.” Photo courtesy of Heritage Gas.

“What Heritage Gas has done, and we’re unique in the Maritimes in doing this, is we’ve entered into multiple long-term transportation contracts and a storage contract that we think will result in the price of natural gas in Nova Scotia becoming much more stable than it is today,” he said.

A graduate of Dalhousie University’s chemical engineering program, Hawkins joined Heritage Gas in 2014 after working with Nova Scotia Power for 15 years and in the pulp and paper industry for 15 years before that. He was named president in 2017.

In 2014, the company signed on to pipeline giant Enbridge Inc.’s Atlantic Bridge expansion project that will ship 131 million cubic feet of natural gas per day from the Algonquin Pipeline northward into the northeast of the United States. Of this amount, approximately 80 million cubic feet of natural gas per day will flow onto the Maritimes and Northeast pipeline system.

More recently, in 2017, Heritage Gas signed a 22-year agreement to buy capacity on the PXP Project. The PXP Project is comprised of three-pipelines, including the Portland Natural Gas Transmission System, TransCanada Pipeline and Union Gas Pipeline.  It will bring natural gas from the Dawn storage and trading hub in Ontario, to a connection point on the Maritimes and Northeast Pipeline in Maine. Dawn, owned and operated by Ontario’s Union Gas, is Canada’s largest integrated storage facility and trading hub. “Both of those projects will diversify our supply,” said Hawkins. “The Dawn project, in particular, will give us very stable, low cost supply.”

“The cost and environmental benefits of natural gas are increasingly being embraced in the province.”

To further reduce price volatility, the utility signed a contract with the Alton natural gas storage project. Located near Stewiacke, N.S., the converted salt cavern will store natural gas bought during the lower-priced summer season for use during the winter. The facility is expected to be operating in 2021.

New drilling technologies unleashed large volumes of propane into the market and some of this supply has been moving into the Maritimes where gas pricing has been higher than other markets. “For the first 15 years of our existence, we offered a huge economic benefit to anyone who converted to natural gas from coal or fuel oil. But starting in 2015 as propane became cheaper our growth rate fell off,” Hawkins said, candidly.  More recently though, with the actions that Heritage Gas has taken, natural gas is improving its competitive position and growth rates are improving.

The cost and environmental benefits of natural gas are increasingly being embraced in the province.  Although the utility has kept itself out of the political arena in the past, carbon pricing and the public perception around fossil fuels has spurred it into action. “We are making government and other stakeholders much more aware of just how important natural gas is to the economy of the province.  Many of the largest industries and employers in the province now use natural gas and many of these are in rural areas.  Our customers also include many of the largest hospitals, universities, and businesses in the province.”  For the future, the utility expects to continue growing by converting the thousands of business and homes in areas currently “in front of” existing infrastructure and by expanding into new housing developments.

Hawkins believes natural gas is far more than a transitional fuel as the province and Canada move away from high carbon emitters toward more renewable fuels to help limit GHGs. “We’ve been spending a lot of time with government and other stakeholders to make sure that people are aware of the important role that natural gas can play in reducing GHG emissions,” said Hawkins. Despite its relatively small customers base, Heritage Gas has grown to be one fifth the size of the provincial electricity utility, in terms of energy delivered. Over the past decade it has helped the province reduce greenhouse gas (GHG) emissions an estimated 1.6 million tonnes by displacing higher-emitting fuels, primarily light and heavy fuel oils. “People talk about natural gas as a transition fuel but we see it as having a longer life than that. In many jurisdictions, fast acting natural gas generators are used to facilitate the addition of more renewables to the electrical grid.  Certainly, in Nova Scotia it has more of a role in its expanded use as an energy source.”

Dina O’Meara has been covering Canadian energy issues for almost 20 years.