Lions Gate Biogas Application - FortisBC
Lions Gate Biogas Application - FortisBC
Lions Gate Biogas Application - FortisBC
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April 14, 2009<br />
British Columbia Utilities Commission<br />
6 th Floor, 900 Howe Street<br />
Vancouver, BC<br />
V6Z 2N3<br />
Attention:<br />
Ms. Erica M. Hamilton, Commission Secretary<br />
Dear Ms. Hamilton:<br />
Tom A. Loski<br />
Chief Regulatory Officer<br />
16705 Fraser Highway<br />
Surrey, B.C. V4N 0E8<br />
Tel: (604) 592-7464<br />
Cell: (604) 250-2722<br />
Fax: (604) 576-7074<br />
Email: tom.loski@terasengas.com<br />
www.terasengas.com<br />
Regulatory Affairs Correspondence<br />
Email: regulatory.affairs@terasengas.com<br />
Re: Terasen Gas Inc. - <strong>Lions</strong> <strong>Gate</strong> Waste Water Treatment Plant <strong>Biogas</strong> Upgrade<br />
Pilot Project <strong>Application</strong><br />
Terasen Gas Inc. (“Terasen Gas”, “TGI” or the “Company”) submits this application (the<br />
“<strong>Application</strong>”) to the British Columbia Utilities Commission (the “Commission”) for approval of<br />
its biogas upgrading demonstration project (the “Project”) at Metro Vancouver’s <strong>Lions</strong> <strong>Gate</strong><br />
Waste Water Treatment Plant (“<strong>Lions</strong> <strong>Gate</strong> WWTP”). Terasen Gas seeks the following<br />
approvals in respect of the Project:<br />
1. A Certificate of Public Convenience and Necessity (“CPCN”) pursuant to Sections 45<br />
and 46 of the Utilities Commission Act ("UCA") to construct and operate the biogas<br />
upgrading facilities at the <strong>Lions</strong> <strong>Gate</strong> WWTP, and to add to rate base the net capital<br />
cost incurred by TGI of approximately $1.33 million (representing $1.7 million direct<br />
project cost, less a $0.366 million contribution from the Province’s Innovative Clean<br />
Energy Fund (“ICE Fund”).<br />
2. Approval pursuant to Section 71 of the UCA of an energy supply agreement with<br />
Greater Vancouver Sewerage & Drainage District (“Metro Vancouver”) for biogas<br />
from the <strong>Lions</strong> <strong>Gate</strong> WWTP in the form included as Appendix 1 to this <strong>Application</strong>,<br />
whereby the raw biogas is acquired by the Company at no charge.<br />
3. Approval pursuant to Sections 59-61 of the UCA to charge the costs (and volumes) of<br />
service for the Project (including the return on rate base, depreciation expense,<br />
operating and maintenance expenses, property taxes and income taxes) to the<br />
Company’s Midstream Cost Reconciliation Account ("MCRA") and recover these<br />
costs from customers through the Midstream Cost Recovery Charge. Since the raw<br />
biogas is being acquired from Metro Vancouver at no charge, the costs of service for<br />
the Project are those associated with the biogas upgrading facilities to be owned and<br />
operated by Terasen Gas.
April 14, 2009<br />
British Columbia Utilities Commission<br />
TGI <strong>Lions</strong> <strong>Gate</strong> WWTP <strong>Biogas</strong> Upgrade Pilot Project <strong>Application</strong><br />
Page 2<br />
The Project represents a significant first step in the development of biogas upgrading as a<br />
new source of renewable energy in British Columbia. As the major natural gas utility in British<br />
Columbia we are uniquely positioned to invest in the Project and promote biogas upgrading<br />
in BC. The Project will permit the upgrading of biogas that would otherwise be flared to<br />
pipeline grade biomethane, and injecting it into our distribution system. The injected<br />
biomethane is expected to displace the quantity of natural gas required to serve<br />
approximately 130 households, and thus reduce greenhouse gases (“GHGs”) by<br />
approximately 645 tonnes annually. As such, the Project is consistent with the 2007 BC<br />
Energy Plan, the province’s Bioenergy Strategy and the "government’s energy objectives" as<br />
set out in the UCA. Further, the government has demonstrated its support of the Project<br />
through the awarding of ICE Funding in July 2008. The Project was one of fifteen proposals<br />
chosen from the sixty applicants for ICE funding under the program’s first call. The Ministry<br />
of Agriculture & Lands have also indicated their support of biogas projects so that lessons<br />
learned from projects such as <strong>Lions</strong> <strong>Gate</strong> can be applied to the agriculture sector to reduce<br />
GHG emissions from agricultural practices.<br />
As indicated in Terasen Gas' recently approved Resource Plan, we see biomethane as a<br />
potential source of supply to meet our customers' evolving needs. We anticipate that the<br />
demonstration Project will yield significant knowledge and experience that can be applied to<br />
future biogas upgrading projects. While the cost of the biomethane yielded by the Project is<br />
greater on a per GJ basis than the current cost of gas acquired by TGI for our customers, the<br />
impact on customer rates is negligible due to the small scale of the Project, and the cost is<br />
more than outweighed by the benefit of having a practical application of biogas upgrading in<br />
service. The technical and environmental risks associated with the Project are considered to<br />
be minimal, and the Squamish Nation has indicated they are generally supportive of the<br />
Project.<br />
Pursuant to Section 71(5) of the Utilities Commission Act and Section 6.0 of the Rules for<br />
Natural Gas Energy Supply Contacts we respectfully request that the Commission exercise<br />
its discretion and hold confidential the information contained in Appendix 2 of this <strong>Application</strong><br />
since it is an energy supply agreement that is not intended for public disclosure. We wish to<br />
maintain the normal practice of filing energy supply agreements on a confidential basis even<br />
though the project involved in this case is a small demonstration project. Future biogas<br />
projects may involve either public or private interests and it may be harmful to the future<br />
development of biogas markets if the commercial agreements must be publicly disclosed in<br />
some cases.<br />
We propose a written hearing process for this <strong>Application</strong>, and believe that the process steps<br />
below will permit proper consideration of the <strong>Application</strong>. In addition, we are prepared to<br />
hold a workshop to explain the <strong>Application</strong> and answer the questions of workshop<br />
participants if the Commission considers that to be of value in supporting an efficient<br />
regulatory review process. We suggest a date of May 7, 2009 for the workshop if one is to be<br />
held. We believe the proposed timetable for review of the <strong>Application</strong> is suitable given the<br />
strong government support of the Project and the minimal impact of this relatively small<br />
demonstration project on customers’ rates. The proposed Regulatory Timetable follows:
April 14, 2009<br />
British Columbia Utilities Commission<br />
TGI <strong>Lions</strong> <strong>Gate</strong> WWTP <strong>Biogas</strong> Upgrade Pilot Project <strong>Application</strong><br />
Page 3<br />
Action: Proposed date:<br />
Commission Procedural Order April 24<br />
Intervenor Registration May 1<br />
Commission Information Request May 11<br />
Intervenor Information Request May 15<br />
TGI Response to Intervenor IR and Commission IR May 29<br />
Intervenor Submissions June 12<br />
TGI Submissions and Reply June 23<br />
The regulatory process outlined above contemplates a Commission decision in July 2009.<br />
A copy of the <strong>Application</strong> has been forwarded directly to the Squamish Nation and we are<br />
following up with the Squamish Nation by telephone.<br />
If you have any questions related to this <strong>Application</strong>, please do not hesitate to contact Dave<br />
Perttula at (604) 592-7470.<br />
Yours very truly,<br />
TERASEN GAS INC.<br />
Original signed:<br />
Tom A. Loski<br />
Attachments<br />
cc : Squamish Nation - Attention: Chief Gibby Jacob<br />
Metro Vancouver - Attention: Martin Clarke<br />
TGI 2008 Annual Review and 2008 Resource Plan Intervenors<br />
Ministry of Energy, Mines and Petroleum Resources<br />
Ministry of Agriculture and Lands
TERASEN GAS INC.<br />
<strong>Lions</strong> <strong>Gate</strong><br />
Waste Water Treatment Plant<br />
<strong>Biogas</strong> Upgrade Pilot Project<br />
<strong>Application</strong><br />
April 14, 2009
TERASEN GAS INC<br />
LIONS GATE WASTE WATER TREATMENT PLANT BIOGAS UPGRADE PILOT PROJECT APPLICATION<br />
Table of Contents<br />
Section 1 Introduction and Overview ................................................................................... 1<br />
Section 2 Regulatory and Policy Context ............................................................................. 4<br />
Section 3 Project Description and Costs .............................................................................. 5<br />
Section 4 Project Justification .............................................................................................. 8<br />
Section 5 Project Risks and Steps to Mitigate Risks ............................................................ 9<br />
Section 6 The <strong>Lions</strong> <strong>Gate</strong> WWTP Biomethane Project Agreement .................................... 12<br />
Section 7 Proposed Regulatory and Financial Treatment .................................................. 13<br />
Section 8 Other Permits and Approvals ............................................................................. 16<br />
Section 9 Consultation ....................................................................................................... 17<br />
Section 10 Conclusion ......................................................................................................... 17<br />
Appendix 1 Draft BCUC Orders<br />
List of Appendices<br />
Appendix 2 Terasen Gas / Metro Vancouver Energy Supply Agreement (filed confidentially<br />
under separate cover)<br />
Appendix 3 Technical Appendix<br />
Appendix 4 Capital Cost Detail<br />
Appendix 5 Financial Model<br />
Page i
TERASEN GAS INC<br />
LIONS GATE WASTE WATER TREATMENT PLANT BIOGAS UPGRADE PILOT PROJECT APPLICATION<br />
1.0 Introduction and Overview<br />
The Project represents a significant first step in the development of biogas upgrading as a new<br />
source of renewable energy in British Columbia. As the major natural gas utility in British<br />
Columbia Terasen Gas is uniquely positioned to invest in the Project and promote biogas<br />
upgrading in BC. The Project will use innovative technology to upgrade biogas that would<br />
otherwise be flared to pipeline grade biomethane, 1<br />
and the upgraded biomethane will be<br />
injected into the Company’s distribution system. The injected biomethane is expected to<br />
displace the quantity of natural gas required to serve approximately 130 households, and thus<br />
reduce greenhouse gases (“GHGs”) by approximately 645 tonnes annually. As such, the<br />
Project is consistent with the 2007 BC Energy Policy, the province’s Bioenergy Strategy and the<br />
"government’s energy objectives" as set out in the UCA. The Government has demonstrated its<br />
support of the Project through the awarding of ICE Funding in July 2008. The Project was one<br />
of fifteen proposals chosen from the sixty applicants for ICE funding under the program’s first<br />
call. The Ministry of Agriculture and Lands have also indicated their support of biogas projects<br />
so that lessons learned from projects such as <strong>Lions</strong> <strong>Gate</strong> can be applied to the agriculture<br />
sector to reduce GHG emissions from agricultural practices.<br />
As indicated in Terasen Gas' recently approved Resource Plan, we see biomethane as a<br />
potential source of renewable supply to meet our customers' evolving needs. We anticipate that<br />
the demonstration Project will yield significant knowledge and experience that can be applied to<br />
future projects. While the cost of the biomethane yielded by the Project is greater on a per GJ<br />
basis than the current cost of natural gas acquired by TGI for our customers, the impact on<br />
customer rates is negligible and is more than outweighed by the benefit of having a practical<br />
application of biogas upgrading in service. The technical and environmental risks associated<br />
with the Project are considered to be minimal, and we have obtained local First Nations’ support<br />
of the Project through consultation with First Nations.<br />
1.1 Applicant<br />
1.1.1 Name, Address, and Nature of Business<br />
TGI is a company incorporated under the laws of the Province of British Columbia and is a<br />
wholly-owned subsidiary of Terasen Inc., which in turn is a wholly-owned subsidiary of Fortis Inc.<br />
TGI maintains an office and place of business at 16705 Fraser Highway, Surrey, British<br />
Columbia, V4N 0E8.<br />
TGI is the largest natural gas distribution utility in British Columbia, providing sales and<br />
transportation services to residential, commercial, and industrial customers in more than 100<br />
communities throughout British Columbia, with approximately 840,000 customers served on the<br />
mainland including the Inland, Columbia, and Lower Mainland service areas. TGI’s distribution<br />
network delivers gas to more than eighty percent of the natural gas customers in British<br />
Columbia.<br />
1 Throughout the <strong>Application</strong> the term “biomethane” will be used to refer to the gas stream after the upgrading<br />
process and the term “biogas” will be used to refer to the raw gas stream prior to the upgrading process.<br />
Page 1
TERASEN GAS INC<br />
LIONS GATE WASTE WATER TREATMENT PLANT BIOGAS UPGRADE PILOT PROJECT APPLICATION<br />
1.1.2 Financial Capability of Applicant<br />
TGI is regulated by the Commission. TGI is capable of financing the Project either directly or<br />
through its parent, Terasen Inc. TGI has credit ratings for senior unsecured debentures from<br />
Dominion Bond Rating Service and Moody’s Investors Service of A and A3 respectively.<br />
Terasen Inc. has credit ratings for senior unsecured debentures from Dominion Bond Rating<br />
Service and Moody’s Investors Service of BBB (High) and Baa2 respectively.<br />
1.1.3 Technical Capability of Applicant<br />
TGI has designed and constructed a system of integrated high, intermediate and low pressure<br />
pipelines and operates more than 38,000 kilometres of natural gas transmission and natural gas<br />
distribution mains and service lines in British Columbia. This transmission and distribution<br />
infrastructure serves approximately 840,000 customers on the mainland. We have the technical<br />
capability, qualified staff and extensive experience in gas flow measurement and gas quality<br />
testing. In addition we have experience operating and maintaining a gas purification system at<br />
our Tilbury LNG facility.<br />
1.1.4 Name, Title, and Address of Company Contact<br />
Tom A. Loski.<br />
Chief Regulatory Officer<br />
Terasen Gas Inc.<br />
16705 Fraser Highway<br />
Surrey, B.C., V4N 0E8<br />
Phone: (604) 592-7464<br />
Facsimile: (604) 576-7074<br />
E-mail: tom.loski@terasengas.com<br />
Regulatory Matters: regulatory.affairs@terasengas.com<br />
1.1.5 Name, Title, and Address of Legal Counsel<br />
Matthew Ghikas<br />
Fasken Martineau DuMoulin LLP<br />
21st Floor, 1075 West Georgia Street<br />
Vancouver, B.C. V6E 3G2<br />
Phone: (604) 631-3191<br />
Facsimile: (604) 632-3191<br />
E-mail: mghikas@fasken.com<br />
1.2 Organization of <strong>Application</strong><br />
This <strong>Application</strong> is organized as follows:<br />
Page 2
TERASEN GAS INC<br />
LIONS GATE WASTE WATER TREATMENT PLANT BIOGAS UPGRADE PILOT PROJECT APPLICATION<br />
Section 2 Regulatory and Policy Context<br />
Section 3 Project Description and Costs<br />
Section 4 Project Justification<br />
Section 5 Project Risks and Steps to Mitigate Risks<br />
Section 6 The <strong>Lions</strong> <strong>Gate</strong> WWTP Biomethane Project Agreement<br />
Section 7 Proposed Regulatory and Financial Treatment<br />
Section 8 Other Permits and Approvals<br />
Section 9 Consultation<br />
Section 10 Conclusion<br />
1.3 Approvals Sought<br />
Terasen Gas Inc. (“Terasen Gas”, “TGI” or the “Company”) submits this application<br />
(“<strong>Application</strong>”) to the British Columbia Utilities Commission (the “Commission”) for approval of<br />
its biogas upgrading demonstration project (the “Project”) at Metro Vancouver’s <strong>Lions</strong> <strong>Gate</strong><br />
Waste Water Treatment Plant (“<strong>Lions</strong> <strong>Gate</strong> WWTP”). Terasen Gas seeks the following<br />
approvals in respect of the Project:<br />
1. A Certificate of Public Convenience and Necessity (“CPCN”) pursuant to Sections 45<br />
and 46 of the Utilities Commission Act ("UCA") to construct and operate the biogas<br />
upgrading facilities at the <strong>Lions</strong> <strong>Gate</strong> WWTP, and to add to rate base the net capital cost<br />
incurred by TGI of approximately $1.33 million (representing $1.7 million direct project<br />
cost, less a $0.366 million contribution from the Province’s Innovative Clean Energy<br />
Fund (“ICE Fund”).<br />
2. Approval pursuant to Section 71 of the UCA of an energy supply contract with Greater<br />
Vancouver Sewerage & Drainage District (“Metro Vancouver”) for biogas from the <strong>Lions</strong><br />
<strong>Gate</strong> WWTP in the form included as Appendix 2 to this <strong>Application</strong>, whereby the raw<br />
biogas is acquired by the Company at no charge.<br />
3. Approval pursuant to Section 59-61 of the UCA to charge the costs (and volumes) of<br />
service for the Project (including the return on rate base, depreciation expense,<br />
operating and maintenance expenses, property taxes and income taxes) to the<br />
Company’s Midstream Cost Reconciliation Account ("MCRA") and recover these costs<br />
from customers through the Midstream Cost Recovery Charge. Since the raw biogas is<br />
being acquired from Metro Vancouver at no charge, the costs of service for the Project<br />
are those associated with the biogas upgrading facilities, net of ICE Funding, to be<br />
owned and operated by Terasen Gas.<br />
In Appendix 1 we have included draft Commission orders pertaining to this <strong>Application</strong>. The first<br />
is a draft procedural order setting out the proposed regulatory process and timetable. The<br />
second is a draft order for approval of the <strong>Application</strong> as filed.<br />
Page 3
TERASEN GAS INC<br />
LIONS GATE WASTE WATER TREATMENT PLANT BIOGAS UPGRADE PILOT PROJECT APPLICATION<br />
2.0 Regulatory and Policy Context<br />
<strong>Biogas</strong> upgrading, as recognized in TGI's latest Resource Plan, represents a potential future<br />
source of renewable supply. Leadership and funding by Terasen Gas is necessary to meet<br />
changing customer needs and expectations. As a public gas utility, Terasen Gas is in a key<br />
position to promote the development of biogas upgrading in support of the Province’s energy<br />
objectives. This Section discusses the regulatory and policy context for this <strong>Application</strong>.<br />
2.1 Regulatory Context<br />
<strong>Biogas</strong> upgrading, including the Project, was identified in TGI’s 2008 Resource Plan as potential<br />
new supply resources for the Company to assist in meeting the goals of the 2007 BC Energy<br />
Plan and the legislated "government's energy objectives”. We stated our intention to pursue<br />
biogas developments in Item 7 of the Action Plan. 2<br />
The Commission accepted the 2008<br />
Resource Plan on December 15, 2008 by Order No. G-194-08. The Commission's acceptance<br />
was unqualified with respect to Action Plan Item 7.<br />
The Project is a small-scale demonstration project. We are in the process of developing<br />
business models and evaluation approaches for future, larger scale, biogas upgrading projects.<br />
We are exploring alternative regulatory and financial treatment models. We anticipate<br />
discussing the next stages of biogas development in our revenue requirement application<br />
expected to be filed in June 2009.<br />
In applying for this CPCN, we recognize that the net capital cost incurred by TGI for the Project<br />
of approximately $1.33 million ($1.7 million total Project cost, less $0.366 million of ICE funding)<br />
is well below the $5 million threshold for CPCN applications established in TGI’s current<br />
Performance Based Rate (“PBR”) Settlement. 3<br />
However, the PBR Settlement contemplated<br />
that in certain circumstances CPCN applications could be filed for smaller projects and the<br />
capital cost associated with CPCN projects is additive to the formula-driven capital under the<br />
PBR Settlement. It is appropriate to seek a CPCN for the Project since it involves new<br />
alternative energy technology and is the first project of this type in British Columbia.<br />
2.2 Policy Context<br />
The policy context supports the development of this Project. As discussed below, biogas<br />
upgrading and the Project align with "government’s energy objectives" of reducing GHGs and<br />
encouraging public utilities to use new technologies that promote the use of renewable<br />
resources. The Project is also consistent with the development of alternative energy sources<br />
and the development of bioenergy projects as outlined in the 2007 BC Energy Plan and the BC<br />
Bioenergy Strategy.<br />
Sections 46 and 71 of the UCA require the Commission to consider "government’s energy<br />
objectives" in the approval of CPCN applications (Section 46 (3.1)) and energy supply contracts<br />
2 In particular, see Section 7.2.2 and Chapter 9. TGI also reiterated its intentions in paragraphs 5 and 12 of the<br />
Company’s final argument dated October 7, 2008.<br />
3 Settlement approved by BCUC Order No. G-51-03<br />
Page 4
TERASEN GAS INC<br />
LIONS GATE WASTE WATER TREATMENT PLANT BIOGAS UPGRADE PILOT PROJECT APPLICATION<br />
(Section 71 (2.5)). The definition of “government’s energy objectives” in section 1 of the UCA<br />
includes:<br />
(a) to encourage public utilities to reduce greenhouse gas emissions;<br />
…<br />
(e) to encourage public utilities to use innovative energy technologies<br />
(i) that facilitate electricity self-sufficiency or the fulfillment of their long-term transmission<br />
requirements, or<br />
(ii) that support energy conservation or efficiency or the use of clean or renewable<br />
sources of energy;<br />
The Project and the associated energy supply contract with Metro Vancouver promote the<br />
reduction of GHGs by displacing load that would otherwise be served by traditional natural gas<br />
and reduce GHG emissions accordingly. Moreover, the Project makes use of innovative energy<br />
technologies and renewable sources of energy. It will showcase British Columbia technology<br />
and innovation in QuestAir’s advanced gas purification system. 4<br />
The BC Government’s support for biogas project development is highlighted in 2008 BC<br />
Bioenergy Strategy. The Bioenergy Strategy states that “Government and its partners will<br />
collaborate to develop B.C. bioenergy projects utilizing energy from wood waste, agriculture,<br />
5<br />
renewable fuels and municipal waste” . The Project will provide the Province, Terasen Gas and<br />
Metro Vancouver with the knowledge and experience to develop larger commercially viable<br />
projects in the future.<br />
3.0 Project Description and Project Costs<br />
This section of the <strong>Application</strong> provides a Project description and identifies the Project costs.<br />
3.1 Project Description<br />
The Project involves the installation of a small, skid-mounted plant within the <strong>Lions</strong> <strong>Gate</strong> WWTP<br />
to recover pipeline-grade biomethane from the raw biogas, and inject the product biomethane<br />
into the local distribution pressure gas line serving the <strong>Lions</strong> <strong>Gate</strong> WWTP that is owned and<br />
operated by Terasen Gas. Based on operating data from the <strong>Lions</strong> <strong>Gate</strong> WWTP provided by<br />
Metro Vancouver, the facility produces approximately 180 cubic meters per hour (m3/h) of<br />
biogas. The wastewater treatment plant uses roughly 100 m3/h for its own heating purposes.<br />
On average, 80 cubic meters per hour (m3/h) of excess raw biogas is produced from the<br />
digestion of municipal waste at the <strong>Lions</strong> <strong>Gate</strong> WWTP. This biogas is burned in a flare operated<br />
at the <strong>Lions</strong> <strong>Gate</strong> WWTP. Upgrading the excess raw biogas will yield approximately 13 TJ<br />
annually of biomethane, enough energy to supply 130 homes.<br />
A schematic diagram of the biogas upgrading process, which uses QuestAir’s advanced gas<br />
purification systems, is found in Figure 1 below. The first component in the process - an<br />
anaerobic digester - is already in operation at the <strong>Lions</strong> <strong>Gate</strong> WWTP and is owned by Metro<br />
4 Further information about the technology is found in the Technical Appendix.<br />
5 BC Bioenergy Strategy – Growing our Natural Energy Advantage, 2008, p.8.<br />
Page 5
TERASEN GAS INC<br />
LIONS GATE WASTE WATER TREATMENT PLANT BIOGAS UPGRADE PILOT PROJECT APPLICATION<br />
Vancouver. The existing flare is also part of Metro Vancouver’s waste water treatment process<br />
and ownership will remain with Metro Vancouver.<br />
Terasen Gas will own the equipment and related infrastructure for the biogas upgrading process<br />
which comprises all the remaining components in Figure 1 (Items B, C, D and E). This includes<br />
the pre-treatment, compression, QuestAir Pressure Swing Adsorption (“PSA”), metering and<br />
interconnection equipment. These facilities will all be skid mounted and located on the property<br />
of the <strong>Lions</strong> <strong>Gate</strong> WWTP. The location of the upgrading and interconnection facilities within the<br />
fence of the <strong>Lions</strong> <strong>Gate</strong> WWTP site means that issues of permitting and consultation are<br />
minimized and can be dealt with in conjunction with Metro Vancouver’s own projects on the site.<br />
Locating the upgrading facilities inside the WWTP property means that environmental studies<br />
are not required.<br />
The Project is expected to be operational by October 2009.<br />
Figure 1: Schematic of <strong>Biogas</strong> Upgrading Process<br />
(A)<br />
Anaerobic<br />
Digester<br />
3.2 Project Costs<br />
(B)<br />
Pre-treatment<br />
(C)<br />
Compressor<br />
QuestAir<br />
M-3200 PSA<br />
Waste Gas<br />
Flare<br />
Interconnection<br />
Facilities<br />
96+% CH4<br />
Product to Pipeline<br />
The overall Project cost, before accounting for the Province’s $366,000 contribution through the<br />
ICE Fund, is approximately $1.7 million. The capital cost estimates for the upgrading facilities<br />
are summarized in Table 1<br />
(D)<br />
(F)<br />
(E)<br />
Page 6
TERASEN GAS INC<br />
LIONS GATE WASTE WATER TREATMENT PLANT BIOGAS UPGRADE PILOT PROJECT APPLICATION<br />
Table 1- Capital Cost Summary<br />
Item Feb. 2009 Estimate<br />
Design $ 170,000<br />
Plant Equipment & Fabrication (PE&F)<br />
Feed compressor and exhaust blower<br />
H2S removal system<br />
QuestAir PSA<br />
Piping and Instrumentation<br />
H2S monitoring<br />
PE&F Total 820,000<br />
Subtotal $ 990,000<br />
Support for Facility Engineering, Construction & Installation 35,000<br />
Commissioning, Start-up and Testing 165,000<br />
Metering, regulating and odorizing skid (Terasen Gas) 80,000<br />
Site facilities 118,000<br />
Geotechnical and foundations 54,300<br />
Metro Vancouver costs 145,700<br />
Total (before PST) $ 1,588,000<br />
PST 111,160<br />
Total Capital Cost $ 1,699,160<br />
A more detailed breakdown of the Plant Equipment and Fabrication portion of the capital costs<br />
is found in Appendix 4.<br />
The low energy yield of the Project means that the costs per GJ of biomethane produced at the<br />
facility will exceed the forecasted cost of natural gas supply. To help improve the economics of<br />
the Project, we applied to the BC government for funding from the ICE Fund. The ICE Fund<br />
was developed by the BC Government to support the GHG reduction goals identified in the<br />
2007 BC Energy Plan. According to the Program Information and <strong>Application</strong> Guidelines:<br />
The mandate of the ICE Fund is to accelerate the development of new<br />
energy technologies that have the potential to solve real, everyday energy<br />
and environmental issues and create significant socio-economic benefits for<br />
all British Columbians 6<br />
.<br />
In July 2008, we were awarded $366,000 from the ICE Fund to help fund the development of<br />
British Columbia’s first biogas upgrading project. Our success in the ICE Funding process is a<br />
6 INNOVATIVE CLEAN ENERGY FUND Program Information & <strong>Application</strong> Guidelines, p.3.<br />
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TERASEN GAS INC<br />
LIONS GATE WASTE WATER TREATMENT PLANT BIOGAS UPGRADE PILOT PROJECT APPLICATION<br />
strong indication of the Government’s support of the Project. Only 15 of 60 projects applying to<br />
the ICE Fund’s first call process were successful.<br />
TGI’s net investment (after ICE funding) is approximately $1.33 million ($1.7 million less $0.366<br />
million).<br />
4.0 Project Justification<br />
The Project justification has three elements. The primary benefit anticipated from the Project is<br />
that our experience with a low volume demonstration project will help us understand the<br />
technical requirements of pursuing biogas as a potential future source of renewable supply on a<br />
larger scale. The Project is an ideal size from a pilot/demonstration perspective. Second, the<br />
Project will also reduce GHG emissions. Third, the success of the Project will potentially lead to<br />
opportunities to work with Metro Vancouver and others on new projects. The anticipated<br />
technical "lessons learned", GHG benefits, and potential opportunities are each discussed<br />
below.<br />
4.1. Improved Technical Understanding of <strong>Biogas</strong> Upgrading<br />
The biogas upgrading plant at the <strong>Lions</strong> <strong>Gate</strong> WWTP will be operated as a demonstration/test<br />
facility. The primary purpose of this demonstration Project will be to validate the technical<br />
feasibility of upgrading biogas from a wastewater treatment plant to pipeline grade, and for all<br />
parties involved including Terasen Gas to gain familiarity with the injection of biomethane into a<br />
gas distribution system.<br />
The Project is expected to yield a number of technical "lessons learned", including:<br />
1. Validation of the performance of the raw biogas pre-treatment system for removal of<br />
contaminants (siloxanes, C2+ hydrocarbons, H2S) from the raw biogas feed. Performance<br />
characteristics to be measured include:<br />
• Contaminant removal efficiency<br />
• Consumption/deactivation rating of consumable adsorption media<br />
• Operating costs related to replacement of consumable media.<br />
2. Validation of the performance the PSA system for upgrading biogas from the digestion of<br />
municipal wastewater to meet Terasen Gas pipeline grade specifications. Key performance<br />
characteristics to be measured include:<br />
• Overall PSA separation efficiency / methane losses<br />
• Performance to meet and/or exceed Terasen Gas’ gas quality specifications<br />
• Removal efficiency of residual contaminants in pre-treated biogas.<br />
3. Overall integration of the biogas upgrading plant into the biogas handling system of the<br />
<strong>Lions</strong> <strong>Gate</strong> WWTP. Performance characteristics to be validated include:<br />
• System control and capability to handle variations in feed gas composition and flow rate<br />
• Integration with the existing flare system at <strong>Lions</strong> <strong>Gate</strong> WWTP to combust the exhaust<br />
gas from the PSA system.<br />
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4. Production levels and output:<br />
• Frequency of outages over a period of time<br />
• Confirm the degree to which, if any, raw biogas production levels exceed the design<br />
upgrading capacity.<br />
The lessons learned at the <strong>Lions</strong> <strong>Gate</strong> WWTP will be used to improve the processes in the<br />
development of other biogas upgrading projects in the municipal waste and agriculture sectors.<br />
The development of biomethane recovery projects will reduce GHGs by displacing natural gas<br />
with clean biomethane. Lessons learned from the Project will also assist in understanding the<br />
cost parameters of biogas projects and what might be expected in terms of economies of scale<br />
from larger projects. Terasen Gas is in a key position to provide leadership and funding to<br />
advance these types of projects with the hope that biogas developments will be able, in the<br />
longer term, to deliver sustainable environmental benefits at a reasonable cost.<br />
4.2 GHG Reduction<br />
A second benefit from the Project is a reduction in GHG emissions. The Project will result in a<br />
reduction in GHG emissions because renewable biomethane created from the upgrading of raw<br />
biogas for will be substituted for 12,900 gigajoules of traditional natural gas. The expected<br />
annual GHG emission reduction associated from the <strong>Lions</strong> <strong>Gate</strong> project is 645 tonnes of CO2e<br />
per year.<br />
The calculation for annual CO2 reduction is as follows:<br />
Gigajoules of Natural Gas displaced 12,900 Gigajoules<br />
Tonnes of CO2e per gigajoule 0.050<br />
Tonnes of CO2e reduced 645<br />
4.3 Opportunities for Future Projects<br />
As indicated in Section 2 above, TGI’s approved 2008 Resource Plan identified biogas<br />
upgrading as a potential new supply resource to help meet our customers’ evolving<br />
expectations and also meet “government's energy objectives”. The success of the Project will<br />
give rise to further opportunities to work with Metro Vancouver, and others, to upgrade the raw<br />
biogas at other wastewater treatment plants. It is estimated that Metro Vancouver could<br />
upgrade a total of 740,000 GJ of biomethane annually which would provide a reduction of<br />
approximately 37,000 tonnes of CO2e per year. A further 2.5 million GJ of biomethane annually<br />
from agricultural waste has been identified for possible upgrading in the Fraser Valley which<br />
could reduce GHG emissions in the region by approximately 125,000 tonnes per year.<br />
5.0 Project Risks and Steps to Mitigate Risks<br />
In this Section, we discuss the Project risks and steps taken to manage those risks. TGI has<br />
managed cost risks through contractual arrangements, and has actively engaged the Squamish<br />
Nation. From an operational perspective, we believe that the Project poses little risk to the<br />
system, and the steps taken to minimize operational risks are also described below.<br />
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5.1 Cost Risk<br />
The Project cost accounts for the recent decrease in the Canadian dollar relative to the U.S.<br />
dollar. The Project cost has increased from $1.1 million (at the time the ICE funding application<br />
was submitted) to $1.7 million, primarily as a result of the Canadian / U.S. exchange rate<br />
influences. 7<br />
The fixed price contract with QuestAir for the upgrading equipment has alleviated<br />
further concerns about exchange rate impacts on the project capital cost.<br />
The Project may be eligible for a provincial sales tax exemption on portions of the upgrading<br />
facilities. Accordingly, we are preparing an application for a PST exemption and will reduce the<br />
Project costs to the extent that the application is successful. Other project cost risks are not<br />
expected to be material.<br />
5.2 First Nations and Land Tenure<br />
TGI has participated with Metro Vancouver in consultation with the Squamish Nation to secure<br />
its support for the Project.<br />
The upgrading facilities will be located on a portion of land known as the "Cut-off Lands". The<br />
Cut-off Lands are the subject of an agreement among the Province of British Columbia, Canada<br />
and the Squamish Indian Band dated December 5, 1983 to transfer the use and the benefit of<br />
the Cut-off Lands to the Squamish Indian Band. The Cut-off Land Agreement requires Canada<br />
to enter into a lease agreement with Metro Vancouver in respect of Metro Vancouver waste<br />
water treatment plant. The Province of British Columbia by Order in Council No. 387 dated<br />
March 6, 1984 has ordered that the administration, control and benefit of the Cut-off Lands be<br />
transferred to Canada; however, Canada has not yet accepted the transfer of the Cut-off<br />
Lands. Metro Vancouver, the Province of BC, the Squamish Nation and Canada are negotiating<br />
the terms of a lease of the portion of the Cut-off Lands occupied by Metro Vancouver's <strong>Lions</strong><br />
<strong>Gate</strong> WWTP. This lease is not yet finalized.<br />
Metro Vancouver has provided the Squamish Nation of notice of its intention to enter into an<br />
agreement with Terasen Gas to locate the Project facilities on the grounds of the <strong>Lions</strong> <strong>Gate</strong><br />
WWTP. Terasen Gas in turn has provided written notification to the Squamish Nation regarding<br />
the facility. Terasen Gas and Metro Vancouver met with the Squamish Nation on March 4, 2009<br />
to discuss the Project. The Squamish Nation was supportive of the Project.<br />
5.3 Operational and System Risk<br />
The Project poses minimal operational and system risk.<br />
7 Other contributors to the $600,000 cost increase between the ICE Funding application and this<br />
<strong>Application</strong> are the Metro Vancouver costs and provincial sales tax (both identified in Table 1 above)<br />
which were not included in the ICE funding application.<br />
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First, from a system capacity perspective there are no issues related to the Project since the<br />
biomethane volumes are very small compared to the capacity of the receiving distribution<br />
system in West Vancouver.<br />
Second, we have assessed considerations associated with system integrity. Unlike natural gas,<br />
biomethane does not contain ethane or propane which are used in the chemical detection of the<br />
presence of natural gas. A review of routine leak survey records in the area of the <strong>Lions</strong> <strong>Gate</strong><br />
WWTP confirmed no leaks in the system and no readings for swamp gas which is often<br />
mistaken by the public as natural gas. The biomethane will be odorized through a bypass prior<br />
to injection into the distribution system. Terasen Gas will build and operate the odorant injection<br />
equipment as part of the interconnection facilities.<br />
Terasen Gas will maintain the odorant equipment, meter and regulator. During the start-up<br />
phase of the Project, we will retain QuestAir to maintain the upgrading equipment. The facility<br />
will be monitored by our Gas Control department. Terasen Gas and Metro Vancouver staff will<br />
be trained to operate the equipment. We will also include procedures in our Emergency<br />
Response Plan.<br />
Third, with respect to gas quality, the biomethane will meet the specifications of the West Coast<br />
Energy Inc. tariff, which is the standard on which Terasen Gas receives gas into its transmission<br />
and distribution system. In addition, bacteria will be removed from the raw biogas in the<br />
upgrading process.<br />
During the months following start-up, we will frequently monitor the gas quality received from the<br />
<strong>Lions</strong> <strong>Gate</strong> WWTP, at the outlet of the upgrading plant and at points along the distribution<br />
system within the area. The monitoring is intended to confirm the assumptions used for this<br />
Project as well as providing data to allow for quality control and operational adjustments.<br />
Fourth, with respect to system risk, in the unlikely event that the biomethane was to negatively<br />
affect the quality of gas being consumed in customers’ appliances the overall impact would be<br />
manageable. Low volumes of biomethane will be produced and injected into the distribution<br />
infrastructure. System analysis of the surrounding distribution network indicates that the<br />
maximum number of customers that could be burning the biomethane is approximately 120.<br />
While it is not anticipated that the biomethane will result in customers noticing any difference in<br />
the operation of their appliances or any adverse impacts, one of the key objectives of the pilot is<br />
to prove this out so that future larger scale projects can move forward with confidence.<br />
5.4 Supply Risk<br />
We have managed supply risk through the Biomethane Project Agreement with Metro<br />
Vancouver, discussed in the next section of this <strong>Application</strong>.<br />
Metro Vancouver’s longer term plans for the <strong>Lions</strong> <strong>Gate</strong> WWTP are uncertain at this time. It is a<br />
relatively small facility that may be closed and/or replaced within the 10 to 20 year timeframe. If<br />
changes to Metro Vancouver’s plans resulted in early closure of the <strong>Lions</strong> <strong>Gate</strong> WWTP the<br />
potential impact on viability of the biogas upgrading project is not large and can be mitigated.<br />
The Terasen Gas-owned upgrading facilities are being depreciated over the 15-year contract life<br />
and so the assets are likely to be substantially depreciated by the time such plan changes would<br />
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occur. Further, the upgrading facilities will be skid mounted and it will likely be possible to<br />
redeploy these assets at another biogas upgrading project site.<br />
6.0 The <strong>Lions</strong> <strong>Gate</strong> WWTP Biomethane Project Agreement<br />
TGI is seeking approval pursuant to Section 71 of the UCA of the <strong>Lions</strong> <strong>Gate</strong> WWTP<br />
Biomethane Project Agreement, which is an energy supply contract with Metro Vancouver for<br />
biogas from the <strong>Lions</strong> <strong>Gate</strong> WWTP. The Agreement is found in Appendix 2 of the <strong>Application</strong>.<br />
The Agreement reflects the cooperative working arrangement developed between TGI and<br />
Metro Vancouver and is reasonable and appropriate for allowing the Project to be developed as<br />
a biogas demonstration project. The Agreement is consistent with “government’s energy<br />
objectives” for the reasons described in Section 2 of this <strong>Application</strong>.<br />
The following are highlights of the components of the Agreement.<br />
1. The Agreement sets out that the biogas in excess of Metro Vancouver’s own needs of<br />
approximately 58% of the <strong>Lions</strong> <strong>Gate</strong> WWTP biogas production at the will be made<br />
available to Terasen Gas for upgrading to biomethane.<br />
2. The term of the agreement is for fifteen years from the Effective Date (unless early<br />
termination occurs according to provisions in the agreement.)<br />
3. The Agreement sets out the roles and responsibilities of Metro Vancouver and Terasen<br />
Gas. Metro Vancouver agrees to maintain the <strong>Lions</strong> <strong>Gate</strong> WWTP in a manner that<br />
maintains the quantity and quality of excess biogas and that it will not install new<br />
equipment intended to increase the consumption of biogas at the plant.<br />
4. Terasen Gas is responsible for the costs related to designing, building, operating and<br />
maintaining the biogas upgrading facilities within certain portions of the <strong>Lions</strong> <strong>Gate</strong><br />
WWTP site defined as the “Project Area”.<br />
5. Various terms deal with reports, information and plans that must be provided by one<br />
party to the other and approvals that must be obtained before proceeding with the plans.<br />
6. Various terms set out the conditions of access to the <strong>Lions</strong> <strong>Gate</strong> WWTP by Terasen<br />
agents, employees, contractors and subcontractors and that permission must be<br />
obtained before bringing guests or visitors to the plant.<br />
7. The Agreement sets out that Metro Vancouver will provide the biogas to Terasen Gas at<br />
no charge unless Net Revenues, as defined in the Agreement, are greater than zero.<br />
There is not a significant likelihood that Net Revenues will be greater than zero before<br />
the upgrading facilities are fully depreciated. If circumstances occur where Net<br />
Revenues are greater then zero then Net Revenues will be shared. 8<br />
The fact that, under the Agreement, the raw biogas is being provided to TGI without charge<br />
(other than in the unlikely circumstances outlined in point 7 above) gives the Project a solid<br />
foundation and makes it an ideal candidate as a biogas demonstration project. The Agreement<br />
8<br />
The Agreement describes the sharing arrangement in greater detail. The Agreement has been filed separately on a<br />
confidential basis.<br />
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reflects the desire of both TGI and Metro Vancouver for the Project to succeed and produce the<br />
anticipated technical lessons learned and GHG benefits outlined in Section 4.0 of this<br />
<strong>Application</strong>. Both parties are interested in understanding the potential for future biogas projects.<br />
We have every expectation that the parties to the Agreement will continue to work<br />
collaboratively to ensure the success of the Project.<br />
7.0 Regulatory and Financial Treatment of Project Costs and Biomethane<br />
Volumes<br />
We are proposing to track separately the costs of biomethane development and procurement,<br />
as part of the purpose of the Project is to understand the associated costs. We are seeking<br />
approval pursuant to Section 60 of the UCA to charge the costs of service (and volumes) for the<br />
Project to the Company’s Midstream Cost Reconciliation Account (MCRA) and recover these<br />
costs from customers through the Midstream Cost Recovery Charge. It is efficient to use<br />
existing regulatory and financial constructs for this low volume demonstration Project. The<br />
proposed regulatory and financial treatment appropriately recognizes the Project as a new<br />
supply source into TGI's system. We are considering other alternative financial and regulatory<br />
treatment for future projects, but the proposed approach is most suitable in the circumstances.<br />
7.1 Tracking of Costs<br />
The Company’s investment in biogas upgrading equipment at the <strong>Lions</strong> <strong>Gate</strong> WWTP will be<br />
tracked in separate asset accounts. Further, operating and maintenance costs and any other<br />
costs pertaining to the acquisition and upgrading of biogas to suitable quality for injection into<br />
the Terasen Gas system will be recorded in separate accounts. The separate tracking of<br />
biomethane costs will enable an overall calculation of the cost of service and average unit cost<br />
of biomethane, as discussed in section 7.2.<br />
Since the raw biogas is being acquired from Metro Vancouver at no charge, the costs of service<br />
for the Project are those associated with the biogas upgrading facilities to be owned and<br />
operated by Terasen Gas. The components of the overall biomethane costs will be as follows:<br />
o Terasen Gas capital costs of biogas upgrading equipment to be recorded in the<br />
appropriate Products Extraction Plant accounts (Accounts 420 - 429 in the BCUC<br />
Uniform System of Accounts for Gas Utilities).`<br />
o Operating & maintenance costs, depreciation expense and any property taxes related to<br />
biogas upgrading and connecting facilities will be recorded in appropriate accounts<br />
corresponding to the asset accounts.<br />
o <strong>Biogas</strong> and biomethane purchase costs will be recorded in separate commodity<br />
accounts. The Agreement with Metro Vancouver (attached as Appendix 2) does not<br />
include any payments being made by Terasen Gas for the raw biogas for the first<br />
number of years. After the upgrading facilities have been fully depreciated there is the<br />
possibility that some payments will be made for to Metro Vancouver under the benefits<br />
sharing provisions of the Agreement. Future contracts in respect of other bioenergy<br />
developments will potentially include costs associated with either raw biogas or<br />
upgraded biomethane purchases.<br />
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7.2 Determination of Cost of Service<br />
All of the separately-tracked costs for biogas upgrading at <strong>Lions</strong> <strong>Gate</strong> WWTP will be used to<br />
determine an overall cost of service for the Project. The elements of the cost of service, which<br />
will be recalculated annually, are described below:<br />
o Return on the biogas rate base will be determined in the normal fashion using the<br />
approved Terasen Gas capital structure, debt rates and return on equity. Any future<br />
approved changes to TGI’s capital structure and return on equity will be reflected in the<br />
return on rate base of the <strong>Lions</strong> <strong>Gate</strong> assets.<br />
o Depreciation expense for the Terasen-owned upgrading facilities at <strong>Lions</strong> <strong>Gate</strong> WWTP<br />
will be based on a 6.67% depreciation rate. The 6.67% depreciation rate has been<br />
adopted to reflect the term of the contract with Metro Vancouver. The depreciation rate is<br />
also consistent with the expected service life of the upgrading equipment which is in the<br />
range of 15 to 20 years. If the <strong>Lions</strong> <strong>Gate</strong> WWTP ceases to operate or the<br />
demonstration Project is discontinued for any reason there is a reasonable likelihood<br />
that the assets will have useful life remaining and can be redeployed at another biogas<br />
upgrading site.<br />
o Income taxes will be determined in the same fashion as with other TGI revenue<br />
requirement / cost of service filings. The effects of depreciation expense and capital cost<br />
allowance on the income tax calculation will be based on the specific depreciation rates<br />
and capital cost allowance classes for the Terasen-owned biogas upgrading facilities.<br />
o Operating and maintenance expenses for the <strong>Lions</strong> <strong>Gate</strong> upgrading facilities are<br />
estimated to be about $40,000 annually. These are for electrical power, measurement<br />
and monitoring of the biogas flows and quality, replacement of consumable media,<br />
telecommunications costs, equipment maintenance and general maintenance around<br />
the facilities. Property taxes for the biogas upgrading facilities are not expected to be<br />
material but will be included in the biomethane cost of service to the extent that any<br />
incremental property taxes are incurred.<br />
o If and when there are purchase costs for raw biogas or upgraded biomethane these<br />
costs (and volumes) will also be included in the overall cost of service for biomethane.<br />
o The upgraded biomethane volumes injected into the Terasen Gas system from the <strong>Lions</strong><br />
<strong>Gate</strong> WWTP will be exempt from the BC Carbon Tax. Any benefit of the carbon tax<br />
exemption will be netted against the overall cost of service of the upgraded biomethane.<br />
A financial model of the Project incorporating all the above elements is attached to this<br />
application as Appendix 5 9<br />
. The forecast average cost of the product biomethane based on the<br />
assumptions employed is $13.64 / GJ over the life of the project. While the biomethane supply<br />
from the Project is more costly than natural gas in current market conditions the annual volumes<br />
9 Appendix 5 provides an analysis of the Project on both a cost of service basis and a cash flow basis. The cash flow<br />
analysis is provided to comply with the directive in the BCUC Decision on the Fraser River Crossing Upgrade<br />
Project (Order C-2-09 and Decision dated March 12, 2009, page 49). Since the Project is being advanced as a<br />
demonstration project and not as a competitive energy supply option the results of the analysis under either basis are<br />
presented primarily for information purposes.<br />
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from the Project are small, representing only about 1/100th of one percent of the Company’s<br />
core market sales volumes, so the impact on customers will not be significant. We also note that<br />
there have been periods of volatility and high prices in natural gas markets in the past in which<br />
gas prices have exceeded the expected average cost of biomethane from the Project. We<br />
believe the benefits of proceeding with the Project, in terms of gaining knowledge and<br />
experience with biogas upgrading, and setting the stage for future biomethane developments<br />
and advancement of "government’s energy objectives", more than outweigh the incremental<br />
costs associated with the Project.<br />
7.3 Proposed Financial Treatment and Recovery of Costs through MCRA<br />
As an initial approach to dealing with the biomethane costs from the <strong>Lions</strong> <strong>Gate</strong> facility as<br />
commodity costs, Terasen Gas proposes to transfer the overall biomethane costs of service and<br />
volumes into the MCRA on a monthly basis. There are two key reasons why the proposed<br />
financial treatment and the use of the MCRA are appropriate at this time.<br />
First, the biomethane from the Project will be a new commodity source and it is appropriate at<br />
this early stage of biogas supply and market development to use an existing commodity<br />
mechanism to recover the costs from customers. We considered the potential to develop new<br />
regulatory and financial structures for this Project, including mechanisms that would allow for<br />
the segregation of biogas-related costs and permit the biomethane to be sold as a “green”<br />
offering at a premium versus the regular rates. This may prove to be a viable option in the<br />
future, but it is premature to implement such structures without the benefit of the anticipated<br />
“lessons learned” from the Project. Given the Project will be Terasen’s sole source of<br />
biomethane the lack of supply diversity will make it difficult to manage a “green” offering. A<br />
“green” offering will be more appropriate at such time as we understand the supply profile and<br />
have multiple sources of biomethane to manage supply and demand for the “green” offering. .<br />
Second, the Project costs and volumes associated with the Project are analogous to costs and<br />
volumes already captured through commodity-related accounts such as the MCRA. The costs<br />
of service of the upgrading facilities are integral components of the biomethane commodity<br />
costs. Raw biogas is not of acceptable quality to take into the Company’s distribution system.<br />
The upgrading facilities in a biomethane project perform the same function of removing<br />
contaminants from the raw biogas as a natural gas processing plant does for the raw natural<br />
gas stream. The costs of biogas upgrading are therefore a supply cost component of the<br />
biomethane just as natural gas processing costs are part of the supply costs of natural gas.<br />
We have considered whether it would be appropriate to include the biomethane costs in the<br />
Commodity Cost Reconciliation Account (CCRA) rather than the MCRA but concluded that the<br />
MCRA is more appropriate. In addition to the reasons outlined above, the biomethane from the<br />
<strong>Lions</strong> <strong>Gate</strong> does not comply with the CCRA requirements to deliver the commodity in certain<br />
proportions at natural gas market hubs. Unlike CCRA supply contracts, the biomethane supply<br />
from the Project cannot be characterized as firm baseload supply; the frequency of outages and<br />
variability in flows of raw biogas from the Project are still unknown.<br />
Biomethane is exempt from the BC Carbon Tax. 10<br />
Since the costs of biomethane from the <strong>Lions</strong><br />
<strong>Gate</strong> WWTP will be recovered from customers through the MCRA and Midstream Charge it is<br />
10 The Carbon Tax Act contains the following definition of “fuel” for the purposes of determining the carbon tax:<br />
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appropriate that the savings from avoided carbon taxes also be passed through in the same<br />
fashion.<br />
7.4 Next Steps in <strong>Biogas</strong> Development and New Regulatory Structures<br />
We are currently in the process of developing an overall strategy and plan with respect to<br />
biomethane programs and we expect to bring forward the next phases of our biomethane<br />
strategy development in our revenue requirement application to be filed later in 2009. We<br />
recently received nine (9) expressions of interest in its <strong>Biogas</strong> Request for Expressions of<br />
Interest (“RFEOI”) process. Evaluation and development of these expressions of interest will<br />
continue to occur over the coming months but the results of that evaluation will inform<br />
expectations about the future development of biomethane supplies in BC.<br />
A related element of our assessment of biogas opportunities will be the potential to develop new<br />
regulatory and financial structures tailored to biogas supply. This analysis will include<br />
mechanisms that would allow for the segregation of biogas-related costs and permit the biogas<br />
to be sold as a “green” offering at a premium versus the regular rates.<br />
8.0 Other Permits and Approvals<br />
We have made an assessment of other permits and approvals that will be required for the<br />
Project and do not anticipate that these will pose a hindrance to the Project proceeding. These<br />
are as follows.<br />
The Project is regulated from a technical perspective by the Oil and Gas Commission (“OGC”)<br />
which follows the CSA Z662 code. The OGC determines in its approval whether environmental<br />
or archaeological reviews are required. Since the Project is located on the existing site of the<br />
<strong>Lions</strong> <strong>Gate</strong> WWTP and there are no archaeological sites on that land these reviews are not<br />
expected to be required. Based on our experience in working with the OGC and the particular<br />
circumstances of the Project we expect that OGC approval will be obtained in a timely fashion in<br />
the normal course of business.<br />
A Building Permit must be obtained from the City of West Vancouver. The City of West<br />
Vancouver handles building code compliance on its own behalf and on behalf of the Squamish<br />
Nation where Squamish Nation interests are involved. Given the Squamish Nation support for<br />
the Project (discussed in Sections 5.2 and 9) we believe that obtaining the building permit<br />
should be a straightforward matter.<br />
Since the lands occupied by the <strong>Lions</strong> <strong>Gate</strong> WWTP are adjacent to the shoreline of Burrard Inlet<br />
we are presently confirming whether notification or information must be provided to bodies with<br />
jurisdiction over the local marine environment such as Port Metro Vancouver or the Department<br />
"fuel" means a substance set out in column 2 of the Table in Schedule 1 but does not include<br />
(a) ethanol or methanol produced from biomass,<br />
(b) biodiesel and other biofuels, and<br />
(c) methane produced by waste in a landfill;<br />
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of Fisheries and Oceans Given the Project’s offset from the marine foreshore environment, it<br />
is not anticipated that any review of the Project required by these bodies will be onerous.<br />
Once the Project is constructed and ready to begin operating, a pressure vessel operating<br />
permit must be obtained from the BC Safety Authority. This is a normal course permit that<br />
Terasen Gas obtains regularly in carrying out its operations. We do not expect any impediments<br />
in obtaining this permit.<br />
9.0 Consultation<br />
TGI has worked cooperatively with Metro Vancouver, the operator of the facility, as is evidenced<br />
by the Agreement. The Province has indicated its support through providing funding for the<br />
Project.<br />
Consultation with the Squamish Nation has taken place in a manner, and to an extent that<br />
appropriately recognizes the Squamish Nation's ongoing interest in the Project lands but also<br />
the limited potential for the Project to adversely affect the nearby Reserve or any asserted<br />
aboriginal rights and title beyond the Reserve lands. The Project is located on previously<br />
disturbed land entirely within the existing <strong>Lions</strong> <strong>Gate</strong> WWTP. The <strong>Lions</strong> <strong>Gate</strong> WWTP is<br />
physically removed from surrounding residences or businesses. The Project facilities are<br />
mounted on a skid. As such, the Project is unlikely to have any physical impact on the<br />
surrounding areas, or the land itself. The Project will reduce the need for flaring of raw biogas.<br />
Metro Vancouver has provided the Squamish Nation of notice of its intention to enter into an<br />
agreement with Terasen Gas to locate the Project facilities on the grounds of the <strong>Lions</strong> <strong>Gate</strong><br />
WWTP. Terasen Gas in turn has provided written notification to the Squamish Nation regarding<br />
the facility. Terasen Gas and Metro Vancouver met with the Squamish Nation on March 4, 2009<br />
to discuss the Project. The Squamish Nation was supportive of the Project.<br />
We will continue to work to address any issues raised by the Squamish Nation.<br />
10.0 Conclusion<br />
The Project represents a significant first step in the development of biogas as a new source of<br />
renewable energy to meet our customers’ changing expectations and “government’s energy<br />
objectives”. TGI, as the major natural gas utility in British Columbia and the local natural gas<br />
distribution provider in the vicinity of the <strong>Lions</strong> <strong>Gate</strong> WWTP, is uniquely positioned to invest in<br />
the Project and promote the development of biogas upgrading in BC. The Project, and the<br />
associated Agreement, is consistent with the 2007 BC Energy Policy, the province’s Bioenergy<br />
Strategy and "government’s energy objectives" as set out in the Act. The proposed financial and<br />
regulatory treatment is appropriate in the circumstances of this Project.<br />
Terasen Gas respectfully requests that the Commission grant the orders as sought in this<br />
<strong>Application</strong>.<br />
Page 17
Appendix 1<br />
DRAFT ORDERS
SIXTH FLOOR, 900 HOWE STREET, BOX 250<br />
VANCOUVER, B.C. V6Z 2N3 CANADA<br />
web site: http://www.bcuc.com<br />
IN THE MATTER OF<br />
the Utilities Commission Act, R.S.B.C. 1996, Chapter 473<br />
and<br />
Order No. G-XX-0X<br />
Page 1 of 4<br />
TELEPHONE: (604) 660-4700<br />
BC TOLL FREE: 1-800-663-1385<br />
FACSIMILE: (604) 660-1102<br />
An <strong>Application</strong> by Terasen Gas Inc.<br />
for a Certificate of Public and Convenience and Necessity<br />
for the <strong>Lions</strong> <strong>Gate</strong> Waste Water Treatment Plant <strong>Biogas</strong> Upgrading Demonstration Project<br />
and<br />
for approval of an Energy Supply Contract for <strong>Biogas</strong> from the <strong>Lions</strong> <strong>Gate</strong> Waste Water Treatment Plant<br />
BEFORE:<br />
WHEREAS:<br />
(Date)<br />
A. On April 9, 2009, Terasen Gas applied, pursuant to sections 45 and 46 of the Utilities Commission Act<br />
(the “Act”), for a Certificate of Public Convenience and Necessity (“CPCN”) (the “<strong>Application</strong>”) to construct<br />
and operate the biogas upgrading facilities at Metro Vancouver’s <strong>Lions</strong> <strong>Gate</strong> Waste Water Treatment Plant<br />
(“<strong>Lions</strong> <strong>Gate</strong> WWTP”) as a demonstration Project (the “Project”); and<br />
B. The Project, involves the installation at the <strong>Lions</strong> <strong>Gate</strong> WWTP of a small, skid-mounted plant to recover<br />
pipeline-grade biomethane from the raw biogas produced by <strong>Lions</strong> <strong>Gate</strong> WWTP and inject the pipelinegrade<br />
biomethane into TGI’s local distribution pressure gas line serving the <strong>Lions</strong> <strong>Gate</strong> WWTP; and<br />
C. The Government of British Columbia has demonstrated its support of the Project through the awarding<br />
Innovative Clean Energy funding of $ 366,000 in July 2008. The Ministry of Agriculture and Lands has also<br />
indicated support of biogas projects so that lessons learned from projects such as the <strong>Lions</strong> <strong>Gate</strong> project can<br />
be applied to the agriculture sector to reduce GHG emissions from agricultural practices.<br />
D. The Project has a direct capital cost of approximately $1.7 million (offset by funding from the Province in the<br />
amount of approximately $366,000); and
SIXTH FLOOR, 900 HOWE STREET, BOX 250<br />
VANCOUVER, B.C. V6Z 2N3 CANADA<br />
web site: http://www.bcuc.com<br />
Order No. G-XX-0X<br />
Page 2 of 4<br />
TELEPHONE: (604) 660-4700<br />
BC TOLL FREE: 1-800-663-1385<br />
FACSIMILE: (604) 660-1102<br />
E. TGI also applies pursuant to section 71 of the Act for approval of an energy supply contract with Greater<br />
Vancouver Sewerage and Drainage District ("Metro Vancouver") for raw biogas from the <strong>Lions</strong> <strong>Gate</strong> WWTP<br />
in the form included as Appendix 1 to the <strong>Application</strong>; and<br />
F. TGI seeks approval pursuant to sections 59-61 of the Act to charge the costs (and volumes) of service for the<br />
Project (including the return on rate base, depreciation expense, operating and maintenance expenses,<br />
property taxes and income taxes) to the Midstream Cost Reconciliation Account and recover these costs<br />
from customers through the Midstream Cost Recover Charge; and<br />
G. TGI states that the Project is a significant first step in the development of a new source of renewable energy<br />
to meet evolving customer expectations and is consistent with the 2007 BC Energy Policy, the Province’s<br />
Bioenergy Strategy and the “government’s energy objectives” as set out in the Act; and<br />
H. TGI states that while the cost of the biomethane yielded by the Project is greater on a per GJ basis than the<br />
current cost of gas acquired by TGI for its customers, the impact on rates will be negligible and will be<br />
outweighed by the significant learning benefits of having a practical application of biogas upgrading in<br />
service; and<br />
I. TGI states that appropriate consultation in respect of the Project has been undertaken with the Squamish<br />
Nation; and<br />
J. TGI has advised that notice of this <strong>Application</strong> has been provided to participants in TGI's 2008 Annual Review<br />
and intervenors in TGI's most recent Resource Plan; and<br />
K. TGI considers that a written hearing process is appropriate for the review of the <strong>Application</strong> and proposes a<br />
regulatory timetable; and<br />
L. The Commission considers that establishing a Regulatory Timetable for the registration of Intervenors and<br />
for the review of the <strong>Application</strong> is necessary and in the public interest.; and<br />
M. The Commission has reviewed the <strong>Application</strong> and considers that a written public hearing process is<br />
required.<br />
NOW THEREFORE the Commission orders as follows:<br />
1. The <strong>Application</strong> will be examined by a written public hearing process in accordance with the<br />
Regulatory Timetable attached as Appendix A.
SIXTH FLOOR, 900 HOWE STREET, BOX 250<br />
VANCOUVER, B.C. V6Z 2N3 CANADA<br />
web site: http://www.bcuc.com<br />
Order No. G-XX-0X<br />
Page 3 of 4<br />
TELEPHONE: (604) 660-4700<br />
BC TOLL FREE: 1-800-663-1385<br />
FACSIMILE: (604) 660-1102<br />
2. The <strong>Application</strong>, together with any supporting materials, will be made available for inspection at<br />
the TGI Office, 16705 Fraser Highway, Surrey, BC, V4N 0E8 and at the British Columbia Utilities<br />
Commission, Sixth Floor, 900 Howe Street, Vancouver, B.C., V6Z 2N3 and will also be available on<br />
the TGI website.<br />
3. Intervenors or Interested Parties should register with the Commission, in writing or electronic<br />
submission, by Friday May 1, 2009. Intervenors should specifically state the nature of their interest<br />
in the <strong>Application</strong> and identify the extent of their anticipated involvement in the review process.<br />
DATED at the City of Vancouver, In the Province of British Columbia, this 24th day of April, 2009.<br />
Attachment<br />
BY ORDER
SIXTH FLOOR, 900 HOWE STREET, BOX 250<br />
VANCOUVER, B.C. V6Z 2N3 CANADA<br />
web site: http://www.bcuc.com<br />
REGULATORY AGENDA AND TIMETABLE<br />
APPENDIX A<br />
to Order No. G-XX-0X<br />
Page 4 of 4<br />
TELEPHONE: (604) 660-4700<br />
BC TOLL FREE: 1-800-663-1385<br />
FACSIMILE: (604) 660-1102<br />
An <strong>Application</strong> by Terasen Gas Inc.<br />
for a Certificate of Public and Convenience and Necessity<br />
for the <strong>Lions</strong> <strong>Gate</strong> Waste Water Treatment Plant <strong>Biogas</strong> Upgrading Demonstration Project<br />
and<br />
for approval of an Energy Supply Contract for <strong>Biogas</strong> from the <strong>Lions</strong> <strong>Gate</strong> Waste Water Treatment Plant<br />
ACTION<br />
DATES (2009)<br />
Commission Issues Procedural Order Friday, April 24<br />
Intervenor Registration Friday, May 1<br />
<strong>Application</strong> Workshop (if desired) Thursday, May 7<br />
Commission Information Request No. 1 Monday, May 11<br />
Intervenor Information Request No. 1 Friday, May 15<br />
TGI Response to Intervenor IR No. 1 and Commission IR No.1 Friday, May 29<br />
Intervenor Submissions Friday, June 12<br />
TGI Submissions and Reply Friday, June 23<br />
Anticipated Commission Decision July
SIXTH FLOOR, 900 HOWE STREET, BOX 250<br />
VANCOUVER, B.C. V6Z 2N3 CANADA<br />
web site: http://www.bcuc.com<br />
IN THE MATTER OF<br />
The Utilities Commission Act, R.S.B.C. 1996 Chapter 473<br />
and<br />
An <strong>Application</strong> by Terasen Gas Inc.<br />
for a Certificate of Public and Convenience and Necessity<br />
Order No. G-XX-0X<br />
Page 1 of 2<br />
TELEPHONE: (604) 660-4700<br />
BC TOLL FREE: 1-800-663-1385<br />
FACSIMILE: (604) 660-1102<br />
for the <strong>Lions</strong> <strong>Gate</strong> Waste Water Treatment Plant <strong>Biogas</strong> Upgrading Demonstration Project<br />
and<br />
for approval of an Energy Supply Contract for <strong>Biogas</strong> from the <strong>Lions</strong> <strong>Gate</strong> Waste Water Treatment Plant<br />
BEFORE:<br />
A. On April 14, 2009, Terasen Gas Inc. (“TGI”) applied to the British Columbia Utilities Commission (the<br />
“Commission”), pursuant to sections 45 and 46 of the Utilities Commission Act (the “Act”), for a<br />
Certificate of Public Convenience and Necessity (“CPCN”) for the <strong>Lions</strong> <strong>Gate</strong> Waste Water Treatment<br />
Plant (“<strong>Lions</strong> <strong>Gate</strong> WWTP”) <strong>Biogas</strong> Upgrading Demonstration Project (the “Project”);<br />
B. The Project, which has a direct capital cost of approximately $1.7 million (offset by funding from the<br />
Province in the amount of approximately $366,000), involves the installation at the <strong>Lions</strong> <strong>Gate</strong><br />
WWTP of a small, skid-mounted plant to recover pipeline-grade biomethane from the raw biogas<br />
produced by <strong>Lions</strong> <strong>Gate</strong> WWTP and inject the pipeline-grade biomethane into TGI’s local distribution<br />
pressure gas line serving the <strong>Lions</strong> <strong>Gate</strong> WWTP;<br />
C. TGI also applies pursuant to section 71 of the Act for approval of an energy supply contract with<br />
Greater Vancouver Sewerage and Drainage District ("Metro Vancouver") for raw biogas from the<br />
<strong>Lions</strong> <strong>Gate</strong> WWTP in the form included as Appendix 1 to the <strong>Application</strong>;<br />
D. TGI seeks approval pursuant to sections 59-61 of the Act to charge the costs (and volumes) of<br />
service for the Project (including the return on rate base, depreciation expense, operating and<br />
maintenance expenses, property taxes and income taxes) to the Midstream Cost Reconciliation<br />
Account and recover these costs from customers through the Midstream Cost Recover Charge;
SIXTH FLOOR, 900 HOWE STREET, BOX 250<br />
VANCOUVER, B.C. V6Z 2N3 CANADA<br />
web site: http://www.bcuc.com<br />
Order No. G-XX-0X<br />
Page 2 of 2<br />
TELEPHONE: (604) 660-4700<br />
BC TOLL FREE: 1-800-663-1385<br />
FACSIMILE: (604) 660-1102<br />
E. TGI states that the Project is a significant first step in the development of a new source of renewable<br />
energy to meet evolving customer expectations and is consistent with the 2007 BC Energy Policy,<br />
the Province’s Bioenergy Strategy and the “government’s energy objectives” as set out in the Act;<br />
F. TGI states that while the cost of the biomethane yielded by the Project is greater on a per GJ basis<br />
than the current cost of gas acquired by TGI for its customers, the impact on rates will be negligible<br />
and will be outweighed by the significant learning benefits of having a practical application of biogas<br />
upgrading in service;<br />
G. TGI states that appropriate consultation in respect of the Project has been undertaken with the<br />
Squamish Nation;<br />
H. By Order dated , 2009, the Commission determined that the <strong>Application</strong> would be examined<br />
by a written public hearing process, and established a Regulatory Timetable;<br />
I. Submissions in the proceeding concluded with TGI’s Reply Submission on , 2009; and<br />
J. The Commission Panel has considered the <strong>Application</strong> and the evidence and submissions in the<br />
proceeding and has determined that the Project and associated energy supply contract for biogas<br />
are in the public interest and that the orders sought by TGI should be granted for the reasons set<br />
out in the Reasons for Decision that accompany this Order.<br />
NOW THEREFORE pursuant to sections 45, 46, 59-61 and 71 of the Act, the Commission orders as<br />
follows:<br />
1. A Certificate of Public Convenience and Necessity is granted to TGI to construct and operate the<br />
Project, and the net capital cost incurred by TGI of approximately $1.33 million (representing $1.7<br />
million direct project cost, less a $0.366 million contribution from the Province’s Innovative Clean<br />
Energy Fund) is to be added to rate base.<br />
2. The energy supply contract with Metro Vancouver for biogas from the <strong>Lions</strong> <strong>Gate</strong> WWTP,<br />
substantially in the form included as Appendix 1 to the <strong>Application</strong>, is approved.<br />
3. TGI shall charge the costs of service (and volumes) for the Project (including the return on rate base,<br />
depreciation expense, operating and maintenance expenses, property taxes and income taxes) to<br />
TGI’s Midstream Cost Reconciliation Account and recover these costs from customers through the<br />
Midstream Cost Recovery Charge.<br />
DATED at the City of Vancouver, in the Province of British Columbia, this day of , 2009
Appendix 2<br />
TERASEN GAS – METRO VANCOUVER ENERGY SUPPLY<br />
AGREEMENT<br />
(filed Confidentially under separate cover)
Appendix 3<br />
TECHNICAL APPENDIX
Appendix 3<br />
Technical Appendix<br />
Upgrading of Anaerobic Digester Gas at Waste Water Treatment<br />
Plants<br />
<strong>Biogas</strong> generated from the anaerobic digestion of municipal waste has been typically<br />
used to generate electricity and heat, which are used on-site at the waste water<br />
treatment plant to reduced net power and heating costs. However, recently there has<br />
been a growing interest in the upgrading of raw biogas for sale either as pipeline quality<br />
gas, or a compressed natural gas (CNG) vehicle fuel. A number of biogas upgrading<br />
projects have been installed in Europe, including several projects in Sweden that<br />
produce both pipeline grade gas and CNG vehicle fuel.<br />
<strong>Biogas</strong> Upgrading Process and Related Equipment<br />
The biogas upgrading equipment for the <strong>Lions</strong> <strong>Gate</strong> Project will be purchased as a<br />
complete skid mounted unit from QuestAir. Figure 1 provides a detailed illustration of<br />
the equipment and process included on the skid used to upgrade the raw biogas top<br />
pipeline quality gas. Figure 2 is a representative illustration of the complete skid<br />
mounted package. The overall dimensions of the skid are 24’ x 8’.<br />
Figure 1 – Equipment Included on Skid<br />
(Pre-treatment)<br />
(Compression)<br />
(Methane Separation)<br />
Page 1
Figure 2 – Conceptual Illustration of the <strong>Biogas</strong> Upgrading Plant<br />
A simplified flow diagram of the major processes included in the proposed biogas<br />
upgrading plant is shown in Figure 3. The key unit operations involved in the biogas<br />
upgrading plant are:<br />
i. Pretreatment (B) to remove water and minor contaminants such as hydrogen<br />
sulphide (H2S) and siloxanes from the feed gas.<br />
ii. A compressor (C) to provide sufficient pressure to allow the efficient separation<br />
of biomethane from carbon dioxide in the PSA (Pressure Swing Adsorption)<br />
process<br />
iii. QuestAir’s M-3200 methane purifier (D)<br />
iv. Interconnection Facilities (E) to measure the quality and quantity of biomethane<br />
entering the Terasen Gas distribution system<br />
Page 2
Figure 3 - <strong>Biogas</strong> Upgrading Flowchart<br />
(A)<br />
(B)<br />
Anaerobic<br />
Digester<br />
Pre-treatment<br />
Compressor<br />
Table 1 illustrates a typical composition of raw biogas as well as natural gas. The pretreatment<br />
of the raw biogas is required to remove contaminants such as hydrogen<br />
Sulphide (H2S). The gas is then compressed to approximately 125 psig as required by<br />
QuestAir’s Pressure Swing Adsorption equipment that subsequently separates the<br />
methane (CH4) and carbon dioxide (CO2). The CO2 and a small quantity of methane are<br />
sent to the flare while the remaining methane is sent through the interconnection<br />
facilities and into Terasen Gas’ distribution infrastructure.<br />
Table 1 - Typical Gas Composition<br />
Raw <strong>Biogas</strong> Natural Gas<br />
40-60% CH4 >96% CH4<br />
30-50% CO2
• Raw biogas is introduced under pressure into an<br />
adsorber vessel. Impurities in the raw biogas,<br />
including (CO2) and water vapour (H2O) are<br />
adsorbed onto the surface of the solid adsorbent<br />
material present in the adsorber vessels.<br />
• Purified produce methane exits the top of the<br />
adsorber vessel, and flows to the product of the<br />
PSA.<br />
• The pressure in the adsorber vessel is then<br />
reduced, and the contaminants (CO2, H2O) are<br />
released from the surface of the adsorbent,<br />
regenerating the adsorbent for another PSA cycle.<br />
The contaminant gases exit the bed, and report to<br />
the ‘exhaust’ or waste stream of the PSA system.<br />
• A small amount of product methane is then used to<br />
High<br />
Pressure<br />
CH 4 CH4 Purge<br />
CH 4, CO 2,<br />
H 2O<br />
Adsorbent<br />
Beds<br />
purge the depressurized bed, bringing the bed into condition for another PSA<br />
cycle.<br />
It is necessary to go through multiple PSA cycles to achieve an adequate level of gas<br />
purity. The simplified PSA cycle shown in Figure 4 is therefore repeated in a semi-batch<br />
manner through all of the adsorber vessels in the installation.<br />
At present, QuestAir has PSA systems operating on landfill gas (Cincinnati, OH) and on<br />
anaerobic digester gas generated from agricultural waste (Fennville, MI; Salzburg,<br />
Austria; Widnau, Switzerland). In addition, QuestAir has another 5 methane recovery<br />
systems currently being manufactured or installed at digester gas projects in Europe and<br />
North America.<br />
Page 4<br />
CO 2, H 2O<br />
Low<br />
Pressure
Appendix 4<br />
CAPITAL COST DETAIL
PROJECT COST ESTIMATE QUESTAIR INC.<br />
PROJECT NAME: LIONS GATE WWTP 3FEB09 GAS TYPE<br />
PROJECT NUMBER: 8274 DIGESTER<br />
COST CODE<br />
05<br />
PLANT ENGINEERING EST PRICE<br />
06 QAR PROJECT MANAGEMENT $28,000<br />
07<br />
10<br />
CUSTOMER TRAINING PROGRAM DEVELOPMENT $4,054<br />
A<br />
E<br />
TRAVEL, PER DIEM, MILEAGE $0<br />
PLANT ENGINEERING SUPPORT SUB-TOTAL $32,054<br />
COST CODE PLANT EQUIPMENT & FABRICATION EST PRICE<br />
PSA EQUIPMENT $117,450<br />
20 FABRICATION SUPPORT ON SITE $5,962<br />
21 PURCHASED EQUIPMENT<br />
A INLET KO DRUM $4,888<br />
B COMPRESSOR $72,536<br />
C H2S REMOVAL EQUIPMENT AND FILL $96,000<br />
D AIR COOLED EXCHANGERS $23,751<br />
E POST COMPRESSOR SEPARATOR KO DRUM $4,637<br />
F INSTRUMENT AIR PACKAGE $12,053<br />
G FILTERS $4,266<br />
H CONDENSATE PUMP $1,258<br />
I EXHAUST BLOWER $62,767<br />
J ANALYZERS $65,662<br />
K PROGRAMMING $45,000<br />
22 PIPING $62,011<br />
23 VALVES $36,526<br />
24 ELECTRICAL, CONTROLS, INSTRUMENTATION $95,000<br />
25 STRUCTURAL $25,834<br />
26 TESTING & INSPECTION $10,557<br />
27 MANUFACTURING SUPPORT REMOTE $6,210<br />
28 INSULATION $20,000<br />
29 EQUIPMENT SHIPPING TO QAR/FABRICATOR $16,000<br />
30 TRAVEL, PER DIEM, MILEAGE $0<br />
PRICE BREAKOUT LIONS GATE 9MAR09<br />
PLANT EQUIPMENT & FABRICATION SUPPORT SUB-TOTAL $788,367<br />
PLANT ENGINEERING, EQUIPMENT & FABRICATION TOTAL $820,421
Appendix 5<br />
FINANCIAL SCHEDULES
Appendix 5 <strong>Lions</strong> <strong>Gate</strong> WWTP Biomethane Project<br />
APPENDIX 5<br />
Table of Contents<br />
Page<br />
Financial Assumptions 1<br />
Table 1 Cost of Service Summary 3<br />
Table 2 Rate Base Summary 4<br />
Table 3 Cash Flow Summary 5<br />
Appendix 5 – Financial Schedules Page i
Appendix 5 <strong>Lions</strong> <strong>Gate</strong> WWTP Biomethane Project<br />
Financial Assumptions<br />
Depreciation<br />
• <strong>Biogas</strong> upgrader: 15 years or 6.67% per year<br />
• TGI interconnect: 15 years or 6.67% per year<br />
Taxes<br />
• Combined Federal / Provincial: 30% (2009), 28.5% (2010), 26.5% (2011), 25% (2012+)<br />
• Capital Cost Allowance:<br />
o <strong>Biogas</strong> upgrader - Class 43.1 (30%)<br />
o TGI Interconnect - Class 51 (6%)<br />
Cost of Capital<br />
• Debt / Equity Split: 65% / 35%<br />
• Return on Equity: 8.47%<br />
• Debt Costs: 6.72%<br />
Rate Base Additions<br />
• All equipment in service September 1, 2009<br />
O&M<br />
• $40,000 per year (2009$)<br />
• Inflated at 2% per year<br />
Biomethane Production<br />
Carbon Tax<br />
Raw biogas production (m 3 /hr) 1 80<br />
CH4 composition % of raw biogas 60<br />
CH4 recovery % 85<br />
Upgraded biogas production (m 3 /hr) 40.80<br />
Heating value (MJ/m 3 ) 36.00<br />
Hours per day 24<br />
Days per year 365<br />
Energy per year (GJ/yr) 12,867<br />
Note 1: Excess to Metro Vancouver's needs at the <strong>Lions</strong> <strong>Gate</strong> WWTP<br />
July 1, 2008 to June 30, 2009 $0.50 / GJ<br />
July 1, 2009 to June 30, 2010 $0.75 / GJ<br />
July 1, 2010 to June 30, 2011 $0.99 / GJ<br />
July 1, 2011 to June 30, 2012 $1.24 / GJ<br />
After July 1, 2012 $1.49 / GJ<br />
Appendix 5 – Financial Schedules Page 1
Appendix 5 <strong>Lions</strong> <strong>Gate</strong> WWTP Biomethane Project<br />
Capital Cost Estimate<br />
Questair Costs<br />
Item Cost<br />
Design $170,000<br />
Upgrading facilities 820,000<br />
Support 35,000<br />
Commissioning 165,000<br />
Sub Total - Questair 1,190,000<br />
Terasen Gas Costs<br />
Metering, regulating and odourizing skid 80,000<br />
Site facilities 118,000<br />
Geotechnical & foundations 54,300<br />
Sub Total - Terasen Gas 252,300<br />
Metro Vancouver costs 145,700<br />
Total Capital Cost (before PST) 1,588,000<br />
PST 111,160<br />
Total Capital Cost $1,699,160<br />
Appendix 5 – Financial Schedules Page 2
Appendix 5 <strong>Lions</strong> <strong>Gate</strong> WWTP Biomethane Project<br />
Table 1<br />
<strong>Lions</strong> <strong>Gate</strong> Wastewater Treatment Plant Biomethane Project<br />
Cost of Service Summary ($Thousands)<br />
Calendar Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019<br />
1 2 3 4 5 6 7 8 9 10 11<br />
1 Operating & Maintenance 13 41 42 42 43 44 45 46 47 48 49<br />
2 Depreciation 0 91 91 91 91 91 91 91 91 91 91<br />
3 Income Tax (63) (58) (25) (6) 6 14 20 23 26 27 28<br />
4 Property Tax 0 0 0 0 0 0 0 0 0 0 0<br />
5 Interest Expense 18 57 53 49 46 42 38 34 30 26 22<br />
6 Return on Equity 12 39 36 34 31 28 26 23 20 17 15<br />
7 Total Cost before Carbon Tax Savings('000$) (19) 170 197 210 216 219 219 217 213 209 204<br />
8 Upgraded <strong>Biogas</strong> Production sent to Terasen (GJ) 4,289 12,867 12,867 12,867 12,867 12,867 12,867 12,867 12,867 12,867 12,867<br />
9 <strong>Biogas</strong> Avg Cost before Carbon Tax Savings ($/GJ) (4.47) 13.24 15.31 16.35 16.82 17.01 16.99 16.83 16.57 16.24 15.86<br />
10 Carbon Tax Savings (3) (11) (14) (18) (19) (19) (19) (19) (19) (19) (19)<br />
11 Total Cost after Carbon Tax Savings('000$) (22) 159 183 193 197 200 199 197 194 190 185<br />
12 <strong>Biogas</strong> Avg Cost after Carbon Tax Savings ($/GJ) (5.22) 12.37 14.19 14.98 15.34 15.52 15.50 15.34 15.08 14.75 14.37<br />
2020 2021 2022 2023 2024<br />
Cost of Service Summary (continued) 12 13 14 15 16<br />
1 Operating & Maintenance 50 51 52 53 54<br />
2 Depreciation 91 91 91 91 91<br />
3 Income Tax 28 28 28 28 27<br />
4 Property Tax 0 0 0 0 0<br />
5 Interest Expense 18 14 10 6 2<br />
6 Return on Equity 12 9 7 4 1<br />
7 Total Cost before Carbon Tax Savings('000$) 199 193 187 181 175<br />
8 Upgraded <strong>Biogas</strong> Production sent to Terasen (GJ) 12,867 12,867 12,867 12,867 12,867<br />
9 <strong>Biogas</strong> Avg Cost before Carbon Tax Savings ($/GJ) 15.44 15.01 14.55 14.09 13.62<br />
10 Carbon Tax Savings (19) (19) (19) (19) (19)<br />
11 Total Cost after Carbon Tax Savings('000$) 180 174 168 162 156<br />
12 <strong>Biogas</strong> Avg Cost after Carbon Tax Savings ($/GJ) 13.96 13.52 13.07 12.60 12.13<br />
(2009-24)<br />
13 Before Carbon Tax Savings<br />
14 After Carbon Tax Savings<br />
Levelized <strong>Biogas</strong> Cost ($/GJ)<br />
$15.00<br />
$13.64<br />
PV Cost of Service ('000$)<br />
1,876<br />
1,705<br />
Appendix 5 – Financial Schedules Page 3
Appendix 5 <strong>Lions</strong> <strong>Gate</strong> WWTP Biomethane Project<br />
Table 2<br />
<strong>Lions</strong> <strong>Gate</strong> Wastewater Treatment Plant Biomethane Project<br />
Rate Base Summary ($Thousands)<br />
Calendar Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019<br />
1 2 3 4 5 6 7 8 9 10 11<br />
1 Plant $531 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726<br />
2 Contribution (113) (366) (366) (366) (366) (366) (366) (366) (366) (366) (366)<br />
3 Accumulated Depreciation / Amortization 0 (45) (136) (227) (317) (408) (499) (590) (680) (771) (862)<br />
4 Working Capital 0 0 0 0 0 0 0 0 0 0 0<br />
5 Total Rate Base $419 $1,315 $1,224 $1,134 $1,043 $952 $862 $771 $680 $590 $499<br />
Plant Summary<br />
6 Opening $0 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726<br />
7 Additions 1,726 0 0 0 0 0 0 0 0 0 0<br />
8 Ending 1,726 1,726 1,726 1,726 1,726 1,726 1,726 1,726 1,726 1,726 1,726<br />
9 Average Plant in Service $531 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726<br />
2020 2021 2022 2023 2024<br />
Rate Base Summary (continued) 12 13 14 15 16<br />
1 Plant $1,726 $1,726 $1,726 $1,726 $1,726<br />
2 Contribution (366) (366) (366) (366) (366)<br />
3 Accumulated Depreciation / Amortization (952) (1,043) (1,134) (1,224) (1,315)<br />
4 Working Capital 0 0 0 0 0<br />
5 Total Rate Base $408 $317 $227 $136 $45<br />
Plant Summary<br />
6 Opening $1,726 $1,726 $1,726 $1,726 $1,726<br />
7 Additions 0 0 0 0 0<br />
8 Ending 1,726 1,726 1,726 1,726 1,726<br />
9 Average Plant in Service $1,726 $1,726 $1,726 $1,726 $1,726<br />
Appendix 5 – Financial Schedules Page 4
Appendix 5 <strong>Lions</strong> <strong>Gate</strong> WWTP Biomethane Project<br />
Table 3<br />
<strong>Lions</strong> <strong>Gate</strong> Wastewater Treatment Plant <strong>Biogas</strong> Methane Project<br />
Cash Flow Summary ($Thousands)<br />
Calendar Year 2009 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018<br />
1 2 3 4 5 6 7 8 9 10 11<br />
1 <strong>Lions</strong>gate <strong>Biogas</strong> Equipment 1,699 0 0 0 0 0 0 0 0 0 0<br />
2 ICE Funding (366) 0 0 0 0 0 0 0 0 0 0<br />
3 Net Capital 1,333 0 0 0 0 0 0 0 0 0 0<br />
4 Terminal Value<br />
5 Operating & Maintenance 0 13 41 42 42 43 44 45 46 47 48<br />
6 Taxes 0 (52) (90) (63) (46) (37) (30) (26) (22) (20) (19)<br />
7 Total Cash Flow ('000$) 1,333 (39) (49) (22) (4) 7 14 20 24 27 29<br />
2019 2020 2021 2022 2023 2024<br />
Cash Flow Summary (continued) 12 13 14 15 16 17<br />
1 <strong>Lions</strong>gate <strong>Biogas</strong> Equipment 0 0 0 0 0 0<br />
2 ICE Funding 0 0 0 0 0 0<br />
3 Net Capital 0 0 0 0 0 0<br />
4 Terminal Value 0<br />
5 Operating & Maintenance 49 50 51 52 53 54<br />
6 Taxes (18) (17) (16) (16) (16) (16)<br />
7 Total Cash Flow ('000$) 31 33 34 36 37 38<br />
8 PV Cash Flow (2009-24) 1,401<br />
Appendix 5 – Financial Schedules Page 5