Lions Gate Biogas Application - FortisBC

April 14, 2009 

British Columbia Utilities Commission 

6 th Floor, 900 Howe Street 

Vancouver, BC 

V6Z 2N3 

Attention: 

Ms. Erica M. Hamilton, Commission Secretary 

Dear Ms. Hamilton: 

Tom A. Loski 

Chief Regulatory Officer 

16705 Fraser Highway 

Surrey, B.C. V4N 0E8 

Tel: (604) 592-7464 

Cell: (604) 250-2722 

Fax: (604) 576-7074 

Email: tom.loski@terasengas.com 

www.terasengas.com 

Regulatory Affairs Correspondence 

Email: regulatory.affairs@terasengas.com 

Re: Terasen Gas Inc. - Lions Gate Waste Water Treatment Plant Biogas Upgrade 

Pilot Project Application 

Terasen Gas Inc. (“Terasen Gas”, “TGI” or the “Company”) submits this application (the 

“Application”) to the British Columbia Utilities Commission (the “Commission”) for approval of 

its biogas upgrading demonstration project (the “Project”) at Metro Vancouver’s Lions Gate 

Waste Water Treatment Plant (“Lions Gate WWTP”). Terasen Gas seeks the following 

approvals in respect of the Project: 

1. A Certificate of Public Convenience and Necessity (“CPCN”) pursuant to Sections 45 

and 46 of the Utilities Commission Act ("UCA") to construct and operate the biogas 

upgrading facilities at the Lions Gate WWTP, and to add to rate base the net capital 

cost incurred by TGI of approximately $1.33 million (representing $1.7 million direct 

project cost, less a $0.366 million contribution from the Province’s Innovative Clean 

Energy Fund (“ICE Fund”). 

2. Approval pursuant to Section 71 of the UCA of an energy supply agreement with 

Greater Vancouver Sewerage & Drainage District (“Metro Vancouver”) for biogas 

from the Lions Gate WWTP in the form included as Appendix 1 to this Application, 

whereby the raw biogas is acquired by the Company at no charge. 

3. Approval pursuant to Sections 59-61 of the UCA to charge the costs (and volumes) of 

service for the Project (including the return on rate base, depreciation expense, 

operating and maintenance expenses, property taxes and income taxes) to the 

Company’s Midstream Cost Reconciliation Account ("MCRA") and recover these 

costs from customers through the Midstream Cost Recovery Charge. Since the raw 

biogas is being acquired from Metro Vancouver at no charge, the costs of service for 

the Project are those associated with the biogas upgrading facilities to be owned and 

operated by Terasen Gas.

April 14, 2009 


TGI Lions Gate WWTP Biogas Upgrade Pilot Project Application 

Page 2 

The Project represents a significant first step in the development of biogas upgrading as a 

new source of renewable energy in British Columbia. As the major natural gas utility in British 

Columbia we are uniquely positioned to invest in the Project and promote biogas upgrading 

in BC. The Project will permit the upgrading of biogas that would otherwise be flared to 

pipeline grade biomethane, and injecting it into our distribution system. The injected 

biomethane is expected to displace the quantity of natural gas required to serve 

approximately 130 households, and thus reduce greenhouse gases (“GHGs”) by 

approximately 645 tonnes annually. As such, the Project is consistent with the 2007 BC 

Energy Plan, the province’s Bioenergy Strategy and the "government’s energy objectives" as 

set out in the UCA. Further, the government has demonstrated its support of the Project 

through the awarding of ICE Funding in July 2008. The Project was one of fifteen proposals 

chosen from the sixty applicants for ICE funding under the program’s first call. The Ministry 

of Agriculture & Lands have also indicated their support of biogas projects so that lessons 

learned from projects such as Lions Gate can be applied to the agriculture sector to reduce 

GHG emissions from agricultural practices. 

As indicated in Terasen Gas' recently approved Resource Plan, we see biomethane as a 

potential source of supply to meet our customers' evolving needs. We anticipate that the 

demonstration Project will yield significant knowledge and experience that can be applied to 

future biogas upgrading projects. While the cost of the biomethane yielded by the Project is 

greater on a per GJ basis than the current cost of gas acquired by TGI for our customers, the 

impact on customer rates is negligible due to the small scale of the Project, and the cost is 

more than outweighed by the benefit of having a practical application of biogas upgrading in 

service. The technical and environmental risks associated with the Project are considered to 

be minimal, and the Squamish Nation has indicated they are generally supportive of the 

Project. 

Pursuant to Section 71(5) of the Utilities Commission Act and Section 6.0 of the Rules for 

Natural Gas Energy Supply Contacts we respectfully request that the Commission exercise 

its discretion and hold confidential the information contained in Appendix 2 of this Application 

since it is an energy supply agreement that is not intended for public disclosure. We wish to 

maintain the normal practice of filing energy supply agreements on a confidential basis even 

though the project involved in this case is a small demonstration project. Future biogas 

projects may involve either public or private interests and it may be harmful to the future 

development of biogas markets if the commercial agreements must be publicly disclosed in 

some cases. 

We propose a written hearing process for this Application, and believe that the process steps 

below will permit proper consideration of the Application. In addition, we are prepared to 

hold a workshop to explain the Application and answer the questions of workshop 

participants if the Commission considers that to be of value in supporting an efficient 

regulatory review process. We suggest a date of May 7, 2009 for the workshop if one is to be 

held. We believe the proposed timetable for review of the Application is suitable given the 

strong government support of the Project and the minimal impact of this relatively small 

demonstration project on customers’ rates. The proposed Regulatory Timetable follows:

April 14, 2009 


TGI Lions Gate WWTP Biogas Upgrade Pilot Project Application 

Page 3 

Action: Proposed date: 

Commission Procedural Order April 24 

Intervenor Registration May 1 

Commission Information Request May 11 

Intervenor Information Request May 15 

TGI Response to Intervenor IR and Commission IR May 29 

Intervenor Submissions June 12 

TGI Submissions and Reply June 23 

The regulatory process outlined above contemplates a Commission decision in July 2009. 

A copy of the Application has been forwarded directly to the Squamish Nation and we are 

following up with the Squamish Nation by telephone. 

If you have any questions related to this Application, please do not hesitate to contact Dave 

Perttula at (604) 592-7470. 

Yours very truly, 

TERASEN GAS INC. 

Original signed: 

Tom A. Loski 

Attachments 

cc : Squamish Nation - Attention: Chief Gibby Jacob 

Metro Vancouver - Attention: Martin Clarke 

TGI 2008 Annual Review and 2008 Resource Plan Intervenors 

Ministry of Energy, Mines and Petroleum Resources 

Ministry of Agriculture and Lands

TERASEN GAS INC. 

Lions Gate 

Waste Water Treatment Plant 

Biogas Upgrade Pilot Project 

Application 

April 14, 2009

TERASEN GAS INC 

LIONS GATE WASTE WATER TREATMENT PLANT BIOGAS UPGRADE PILOT PROJECT APPLICATION 

Table of Contents 

Section 1 Introduction and Overview ................................................................................... 1 

Section 2 Regulatory and Policy Context ............................................................................. 4 

Section 3 Project Description and Costs .............................................................................. 5 

Section 4 Project Justification .............................................................................................. 8 

Section 5 Project Risks and Steps to Mitigate Risks ............................................................ 9 

Section 6 The Lions Gate WWTP Biomethane Project Agreement .................................... 12 

Section 7 Proposed Regulatory and Financial Treatment .................................................. 13 

Section 8 Other Permits and Approvals ............................................................................. 16 

Section 9 Consultation ....................................................................................................... 17 

Section 10 Conclusion ......................................................................................................... 17 

Appendix 1 Draft BCUC Orders 

List of Appendices 

Appendix 2 Terasen Gas / Metro Vancouver Energy Supply Agreement (filed confidentially 

under separate cover) 

Appendix 3 Technical Appendix 

Appendix 4 Capital Cost Detail 

Appendix 5 Financial Model 

Page i



1.0 Introduction and Overview 

The Project represents a significant first step in the development of biogas upgrading as a new 

source of renewable energy in British Columbia. As the major natural gas utility in British 

Columbia Terasen Gas is uniquely positioned to invest in the Project and promote biogas 

upgrading in BC. The Project will use innovative technology to upgrade biogas that would 

otherwise be flared to pipeline grade biomethane, 1 

and the upgraded biomethane will be 

injected into the Company’s distribution system. The injected biomethane is expected to 

displace the quantity of natural gas required to serve approximately 130 households, and thus 

reduce greenhouse gases (“GHGs”) by approximately 645 tonnes annually. As such, the 

Project is consistent with the 2007 BC Energy Policy, the province’s Bioenergy Strategy and the 

"government’s energy objectives" as set out in the UCA. The Government has demonstrated its 

support of the Project through the awarding of ICE Funding in July 2008. The Project was one 

of fifteen proposals chosen from the sixty applicants for ICE funding under the program’s first 

call. The Ministry of Agriculture and Lands have also indicated their support of biogas projects 

so that lessons learned from projects such as Lions Gate can be applied to the agriculture 

sector to reduce GHG emissions from agricultural practices. 

As indicated in Terasen Gas' recently approved Resource Plan, we see biomethane as a 

potential source of renewable supply to meet our customers' evolving needs. We anticipate that 

the demonstration Project will yield significant knowledge and experience that can be applied to 

future projects. While the cost of the biomethane yielded by the Project is greater on a per GJ 

basis than the current cost of natural gas acquired by TGI for our customers, the impact on 

customer rates is negligible and is more than outweighed by the benefit of having a practical 

application of biogas upgrading in service. The technical and environmental risks associated 

with the Project are considered to be minimal, and we have obtained local First Nations’ support 

of the Project through consultation with First Nations. 

1.1 Applicant 

1.1.1 Name, Address, and Nature of Business 

TGI is a company incorporated under the laws of the Province of British Columbia and is a 

wholly-owned subsidiary of Terasen Inc., which in turn is a wholly-owned subsidiary of Fortis Inc. 

TGI maintains an office and place of business at 16705 Fraser Highway, Surrey, British 

Columbia, V4N 0E8. 

TGI is the largest natural gas distribution utility in British Columbia, providing sales and 

transportation services to residential, commercial, and industrial customers in more than 100 

communities throughout British Columbia, with approximately 840,000 customers served on the 

mainland including the Inland, Columbia, and Lower Mainland service areas. TGI’s distribution 

network delivers gas to more than eighty percent of the natural gas customers in British 

Columbia. 

1 Throughout the Application the term “biomethane” will be used to refer to the gas stream after the upgrading 

process and the term “biogas” will be used to refer to the raw gas stream prior to the upgrading process. 

Page 1



1.1.2 Financial Capability of Applicant 

TGI is regulated by the Commission. TGI is capable of financing the Project either directly or 

through its parent, Terasen Inc. TGI has credit ratings for senior unsecured debentures from 

Dominion Bond Rating Service and Moody’s Investors Service of A and A3 respectively. 

Terasen Inc. has credit ratings for senior unsecured debentures from Dominion Bond Rating 

Service and Moody’s Investors Service of BBB (High) and Baa2 respectively. 

1.1.3 Technical Capability of Applicant 

TGI has designed and constructed a system of integrated high, intermediate and low pressure 

pipelines and operates more than 38,000 kilometres of natural gas transmission and natural gas 

distribution mains and service lines in British Columbia. This transmission and distribution 

infrastructure serves approximately 840,000 customers on the mainland. We have the technical 

capability, qualified staff and extensive experience in gas flow measurement and gas quality 

testing. In addition we have experience operating and maintaining a gas purification system at 

our Tilbury LNG facility. 

1.1.4 Name, Title, and Address of Company Contact 

Tom A. Loski. 

Chief Regulatory Officer 

Terasen Gas Inc. 

16705 Fraser Highway 

Surrey, B.C., V4N 0E8 

Phone: (604) 592-7464 

Facsimile: (604) 576-7074 

E-mail: tom.loski@terasengas.com 

Regulatory Matters: regulatory.affairs@terasengas.com 

1.1.5 Name, Title, and Address of Legal Counsel 

Matthew Ghikas 

Fasken Martineau DuMoulin LLP 

21st Floor, 1075 West Georgia Street 

Vancouver, B.C. V6E 3G2 

Phone: (604) 631-3191 

Facsimile: (604) 632-3191 

E-mail: mghikas@fasken.com 

1.2 Organization of Application 

This Application is organized as follows: 

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Section 2 Regulatory and Policy Context 

Section 3 Project Description and Costs 

Section 4 Project Justification 

Section 5 Project Risks and Steps to Mitigate Risks 

Section 6 The Lions Gate WWTP Biomethane Project Agreement 

Section 7 Proposed Regulatory and Financial Treatment 

Section 8 Other Permits and Approvals 

Section 9 Consultation 

Section 10 Conclusion 

1.3 Approvals Sought 

Terasen Gas Inc. (“Terasen Gas”, “TGI” or the “Company”) submits this application 

(“Application”) to the British Columbia Utilities Commission (the “Commission”) for approval of 

its biogas upgrading demonstration project (the “Project”) at Metro Vancouver’s Lions Gate 

Waste Water Treatment Plant (“Lions Gate WWTP”). Terasen Gas seeks the following 

approvals in respect of the Project: 

1. A Certificate of Public Convenience and Necessity (“CPCN”) pursuant to Sections 45 

and 46 of the Utilities Commission Act ("UCA") to construct and operate the biogas 

upgrading facilities at the Lions Gate WWTP, and to add to rate base the net capital cost 

incurred by TGI of approximately $1.33 million (representing $1.7 million direct project 

cost, less a $0.366 million contribution from the Province’s Innovative Clean Energy 

Fund (“ICE Fund”). 

2. Approval pursuant to Section 71 of the UCA of an energy supply contract with Greater 

Vancouver Sewerage & Drainage District (“Metro Vancouver”) for biogas from the Lions 

Gate WWTP in the form included as Appendix 2 to this Application, whereby the raw 

biogas is acquired by the Company at no charge. 

3. Approval pursuant to Section 59-61 of the UCA to charge the costs (and volumes) of 

service for the Project (including the return on rate base, depreciation expense, 

operating and maintenance expenses, property taxes and income taxes) to the 

Company’s Midstream Cost Reconciliation Account ("MCRA") and recover these costs 

from customers through the Midstream Cost Recovery Charge. Since the raw biogas is 

being acquired from Metro Vancouver at no charge, the costs of service for the Project 

are those associated with the biogas upgrading facilities, net of ICE Funding, to be 

owned and operated by Terasen Gas. 

In Appendix 1 we have included draft Commission orders pertaining to this Application. The first 

is a draft procedural order setting out the proposed regulatory process and timetable. The 

second is a draft order for approval of the Application as filed. 

Page 3



2.0 Regulatory and Policy Context 

Biogas upgrading, as recognized in TGI's latest Resource Plan, represents a potential future 

source of renewable supply. Leadership and funding by Terasen Gas is necessary to meet 

changing customer needs and expectations. As a public gas utility, Terasen Gas is in a key 

position to promote the development of biogas upgrading in support of the Province’s energy 

objectives. This Section discusses the regulatory and policy context for this Application. 

2.1 Regulatory Context 

Biogas upgrading, including the Project, was identified in TGI’s 2008 Resource Plan as potential 

new supply resources for the Company to assist in meeting the goals of the 2007 BC Energy 

Plan and the legislated "government's energy objectives”. We stated our intention to pursue 

biogas developments in Item 7 of the Action Plan. 2 

The Commission accepted the 2008 

Resource Plan on December 15, 2008 by Order No. G-194-08. The Commission's acceptance 

was unqualified with respect to Action Plan Item 7. 

The Project is a small-scale demonstration project. We are in the process of developing 

business models and evaluation approaches for future, larger scale, biogas upgrading projects. 

We are exploring alternative regulatory and financial treatment models. We anticipate 

discussing the next stages of biogas development in our revenue requirement application 

expected to be filed in June 2009. 

In applying for this CPCN, we recognize that the net capital cost incurred by TGI for the Project 

of approximately $1.33 million ($1.7 million total Project cost, less $0.366 million of ICE funding) 

is well below the $5 million threshold for CPCN applications established in TGI’s current 

Performance Based Rate (“PBR”) Settlement. 3 

However, the PBR Settlement contemplated 

that in certain circumstances CPCN applications could be filed for smaller projects and the 

capital cost associated with CPCN projects is additive to the formula-driven capital under the 

PBR Settlement. It is appropriate to seek a CPCN for the Project since it involves new 

alternative energy technology and is the first project of this type in British Columbia. 

2.2 Policy Context 

The policy context supports the development of this Project. As discussed below, biogas 

upgrading and the Project align with "government’s energy objectives" of reducing GHGs and 

encouraging public utilities to use new technologies that promote the use of renewable 

resources. The Project is also consistent with the development of alternative energy sources 

and the development of bioenergy projects as outlined in the 2007 BC Energy Plan and the BC 

Bioenergy Strategy. 

Sections 46 and 71 of the UCA require the Commission to consider "government’s energy 

objectives" in the approval of CPCN applications (Section 46 (3.1)) and energy supply contracts 

2 In particular, see Section 7.2.2 and Chapter 9. TGI also reiterated its intentions in paragraphs 5 and 12 of the 

Company’s final argument dated October 7, 2008. 

3 Settlement approved by BCUC Order No. G-51-03 

Page 4



(Section 71 (2.5)). The definition of “government’s energy objectives” in section 1 of the UCA 

includes: 

(a) to encourage public utilities to reduce greenhouse gas emissions; 

… 

(e) to encourage public utilities to use innovative energy technologies 

(i) that facilitate electricity self-sufficiency or the fulfillment of their long-term transmission 

requirements, or 

(ii) that support energy conservation or efficiency or the use of clean or renewable 

sources of energy; 

The Project and the associated energy supply contract with Metro Vancouver promote the 

reduction of GHGs by displacing load that would otherwise be served by traditional natural gas 

and reduce GHG emissions accordingly. Moreover, the Project makes use of innovative energy 

technologies and renewable sources of energy. It will showcase British Columbia technology 

and innovation in QuestAir’s advanced gas purification system. 4 

The BC Government’s support for biogas project development is highlighted in 2008 BC 

Bioenergy Strategy. The Bioenergy Strategy states that “Government and its partners will 

collaborate to develop B.C. bioenergy projects utilizing energy from wood waste, agriculture, 

5 

renewable fuels and municipal waste” . The Project will provide the Province, Terasen Gas and 

Metro Vancouver with the knowledge and experience to develop larger commercially viable 

projects in the future. 

3.0 Project Description and Project Costs 

This section of the Application provides a Project description and identifies the Project costs. 

3.1 Project Description 

The Project involves the installation of a small, skid-mounted plant within the Lions Gate WWTP 

to recover pipeline-grade biomethane from the raw biogas, and inject the product biomethane 

into the local distribution pressure gas line serving the Lions Gate WWTP that is owned and 

operated by Terasen Gas. Based on operating data from the Lions Gate WWTP provided by 

Metro Vancouver, the facility produces approximately 180 cubic meters per hour (m3/h) of 

biogas. The wastewater treatment plant uses roughly 100 m3/h for its own heating purposes. 

On average, 80 cubic meters per hour (m3/h) of excess raw biogas is produced from the 

digestion of municipal waste at the Lions Gate WWTP. This biogas is burned in a flare operated 

at the Lions Gate WWTP. Upgrading the excess raw biogas will yield approximately 13 TJ 

annually of biomethane, enough energy to supply 130 homes. 

A schematic diagram of the biogas upgrading process, which uses QuestAir’s advanced gas 

purification systems, is found in Figure 1 below. The first component in the process - an 

anaerobic digester - is already in operation at the Lions Gate WWTP and is owned by Metro 

4 Further information about the technology is found in the Technical Appendix. 

5 BC Bioenergy Strategy – Growing our Natural Energy Advantage, 2008, p.8. 

Page 5



Vancouver. The existing flare is also part of Metro Vancouver’s waste water treatment process 

and ownership will remain with Metro Vancouver. 

Terasen Gas will own the equipment and related infrastructure for the biogas upgrading process 

which comprises all the remaining components in Figure 1 (Items B, C, D and E). This includes 

the pre-treatment, compression, QuestAir Pressure Swing Adsorption (“PSA”), metering and 

interconnection equipment. These facilities will all be skid mounted and located on the property 

of the Lions Gate WWTP. The location of the upgrading and interconnection facilities within the 

fence of the Lions Gate WWTP site means that issues of permitting and consultation are 

minimized and can be dealt with in conjunction with Metro Vancouver’s own projects on the site. 

Locating the upgrading facilities inside the WWTP property means that environmental studies 

are not required. 

The Project is expected to be operational by October 2009. 

Figure 1: Schematic of Biogas Upgrading Process 

(A) 

Anaerobic 

Digester 

3.2 Project Costs 

(B) 

Pre-treatment 

(C) 

Compressor 

QuestAir 

M-3200 PSA 

Waste Gas 

Flare 

Interconnection 

Facilities 

96+% CH4 

Product to Pipeline 

The overall Project cost, before accounting for the Province’s $366,000 contribution through the 

ICE Fund, is approximately $1.7 million. The capital cost estimates for the upgrading facilities 

are summarized in Table 1 

(D) 

(F) 

(E) 

Page 6



Table 1- Capital Cost Summary 

Item Feb. 2009 Estimate 

Design $ 170,000 

Plant Equipment & Fabrication (PE&F) 

Feed compressor and exhaust blower 

H2S removal system 

QuestAir PSA 

Piping and Instrumentation 

H2S monitoring 

PE&F Total 820,000 

Subtotal $ 990,000 

Support for Facility Engineering, Construction & Installation 35,000 

Commissioning, Start-up and Testing 165,000 

Metering, regulating and odorizing skid (Terasen Gas) 80,000 

Site facilities 118,000 

Geotechnical and foundations 54,300 

Metro Vancouver costs 145,700 

Total (before PST) $ 1,588,000 

PST 111,160 

Total Capital Cost $ 1,699,160 

A more detailed breakdown of the Plant Equipment and Fabrication portion of the capital costs 

is found in Appendix 4. 

The low energy yield of the Project means that the costs per GJ of biomethane produced at the 

facility will exceed the forecasted cost of natural gas supply. To help improve the economics of 

the Project, we applied to the BC government for funding from the ICE Fund. The ICE Fund 

was developed by the BC Government to support the GHG reduction goals identified in the 

2007 BC Energy Plan. According to the Program Information and Application Guidelines: 

The mandate of the ICE Fund is to accelerate the development of new 

energy technologies that have the potential to solve real, everyday energy 

and environmental issues and create significant socio-economic benefits for 

all British Columbians 6 

. 

In July 2008, we were awarded $366,000 from the ICE Fund to help fund the development of 

British Columbia’s first biogas upgrading project. Our success in the ICE Funding process is a 

6 INNOVATIVE CLEAN ENERGY FUND Program Information & Application Guidelines, p.3. 

Page 7



strong indication of the Government’s support of the Project. Only 15 of 60 projects applying to 

the ICE Fund’s first call process were successful. 

TGI’s net investment (after ICE funding) is approximately $1.33 million ($1.7 million less $0.366 

million). 

4.0 Project Justification 

The Project justification has three elements. The primary benefit anticipated from the Project is 

that our experience with a low volume demonstration project will help us understand the 

technical requirements of pursuing biogas as a potential future source of renewable supply on a 

larger scale. The Project is an ideal size from a pilot/demonstration perspective. Second, the 

Project will also reduce GHG emissions. Third, the success of the Project will potentially lead to 

opportunities to work with Metro Vancouver and others on new projects. The anticipated 

technical "lessons learned", GHG benefits, and potential opportunities are each discussed 

below. 

4.1. Improved Technical Understanding of Biogas Upgrading 

The biogas upgrading plant at the Lions Gate WWTP will be operated as a demonstration/test 

facility. The primary purpose of this demonstration Project will be to validate the technical 

feasibility of upgrading biogas from a wastewater treatment plant to pipeline grade, and for all 

parties involved including Terasen Gas to gain familiarity with the injection of biomethane into a 

gas distribution system. 

The Project is expected to yield a number of technical "lessons learned", including: 

1. Validation of the performance of the raw biogas pre-treatment system for removal of 

contaminants (siloxanes, C2+ hydrocarbons, H2S) from the raw biogas feed. Performance 

characteristics to be measured include: 

• Contaminant removal efficiency 

• Consumption/deactivation rating of consumable adsorption media 

• Operating costs related to replacement of consumable media. 

2. Validation of the performance the PSA system for upgrading biogas from the digestion of 

municipal wastewater to meet Terasen Gas pipeline grade specifications. Key performance 

characteristics to be measured include: 

• Overall PSA separation efficiency / methane losses 

• Performance to meet and/or exceed Terasen Gas’ gas quality specifications 

• Removal efficiency of residual contaminants in pre-treated biogas. 

3. Overall integration of the biogas upgrading plant into the biogas handling system of the 

Lions Gate WWTP. Performance characteristics to be validated include: 

• System control and capability to handle variations in feed gas composition and flow rate 

• Integration with the existing flare system at Lions Gate WWTP to combust the exhaust 

gas from the PSA system. 

Page 8



4. Production levels and output: 

• Frequency of outages over a period of time 

• Confirm the degree to which, if any, raw biogas production levels exceed the design 

upgrading capacity. 

The lessons learned at the Lions Gate WWTP will be used to improve the processes in the 

development of other biogas upgrading projects in the municipal waste and agriculture sectors. 

The development of biomethane recovery projects will reduce GHGs by displacing natural gas 

with clean biomethane. Lessons learned from the Project will also assist in understanding the 

cost parameters of biogas projects and what might be expected in terms of economies of scale 

from larger projects. Terasen Gas is in a key position to provide leadership and funding to 

advance these types of projects with the hope that biogas developments will be able, in the 

longer term, to deliver sustainable environmental benefits at a reasonable cost. 

4.2 GHG Reduction 

A second benefit from the Project is a reduction in GHG emissions. The Project will result in a 

reduction in GHG emissions because renewable biomethane created from the upgrading of raw 

biogas for will be substituted for 12,900 gigajoules of traditional natural gas. The expected 

annual GHG emission reduction associated from the Lions Gate project is 645 tonnes of CO2e 

per year. 

The calculation for annual CO2 reduction is as follows: 

Gigajoules of Natural Gas displaced 12,900 Gigajoules 

Tonnes of CO2e per gigajoule 0.050 

Tonnes of CO2e reduced 645 

4.3 Opportunities for Future Projects 

As indicated in Section 2 above, TGI’s approved 2008 Resource Plan identified biogas 

upgrading as a potential new supply resource to help meet our customers’ evolving 

expectations and also meet “government's energy objectives”. The success of the Project will 

give rise to further opportunities to work with Metro Vancouver, and others, to upgrade the raw 

biogas at other wastewater treatment plants. It is estimated that Metro Vancouver could 

upgrade a total of 740,000 GJ of biomethane annually which would provide a reduction of 

approximately 37,000 tonnes of CO2e per year. A further 2.5 million GJ of biomethane annually 

from agricultural waste has been identified for possible upgrading in the Fraser Valley which 

could reduce GHG emissions in the region by approximately 125,000 tonnes per year. 

5.0 Project Risks and Steps to Mitigate Risks 

In this Section, we discuss the Project risks and steps taken to manage those risks. TGI has 

managed cost risks through contractual arrangements, and has actively engaged the Squamish 

Nation. From an operational perspective, we believe that the Project poses little risk to the 

system, and the steps taken to minimize operational risks are also described below. 

Page 9



5.1 Cost Risk 

The Project cost accounts for the recent decrease in the Canadian dollar relative to the U.S. 

dollar. The Project cost has increased from $1.1 million (at the time the ICE funding application 

was submitted) to $1.7 million, primarily as a result of the Canadian / U.S. exchange rate 

influences. 7 

The fixed price contract with QuestAir for the upgrading equipment has alleviated 

further concerns about exchange rate impacts on the project capital cost. 

The Project may be eligible for a provincial sales tax exemption on portions of the upgrading 

facilities. Accordingly, we are preparing an application for a PST exemption and will reduce the 

Project costs to the extent that the application is successful. Other project cost risks are not 

expected to be material. 

5.2 First Nations and Land Tenure 

TGI has participated with Metro Vancouver in consultation with the Squamish Nation to secure 

its support for the Project. 

The upgrading facilities will be located on a portion of land known as the "Cut-off Lands". The 

Cut-off Lands are the subject of an agreement among the Province of British Columbia, Canada 

and the Squamish Indian Band dated December 5, 1983 to transfer the use and the benefit of 

the Cut-off Lands to the Squamish Indian Band. The Cut-off Land Agreement requires Canada 

to enter into a lease agreement with Metro Vancouver in respect of Metro Vancouver waste 

water treatment plant. The Province of British Columbia by Order in Council No. 387 dated 

March 6, 1984 has ordered that the administration, control and benefit of the Cut-off Lands be 

transferred to Canada; however, Canada has not yet accepted the transfer of the Cut-off 

Lands. Metro Vancouver, the Province of BC, the Squamish Nation and Canada are negotiating 

the terms of a lease of the portion of the Cut-off Lands occupied by Metro Vancouver's Lions 

Gate WWTP. This lease is not yet finalized. 

Metro Vancouver has provided the Squamish Nation of notice of its intention to enter into an 

agreement with Terasen Gas to locate the Project facilities on the grounds of the Lions Gate 

WWTP. Terasen Gas in turn has provided written notification to the Squamish Nation regarding 

the facility. Terasen Gas and Metro Vancouver met with the Squamish Nation on March 4, 2009 

to discuss the Project. The Squamish Nation was supportive of the Project. 

5.3 Operational and System Risk 

The Project poses minimal operational and system risk. 

7 Other contributors to the $600,000 cost increase between the ICE Funding application and this 

Application are the Metro Vancouver costs and provincial sales tax (both identified in Table 1 above) 

which were not included in the ICE funding application. 

Page 10



First, from a system capacity perspective there are no issues related to the Project since the 

biomethane volumes are very small compared to the capacity of the receiving distribution 

system in West Vancouver. 

Second, we have assessed considerations associated with system integrity. Unlike natural gas, 

biomethane does not contain ethane or propane which are used in the chemical detection of the 

presence of natural gas. A review of routine leak survey records in the area of the Lions Gate 

WWTP confirmed no leaks in the system and no readings for swamp gas which is often 

mistaken by the public as natural gas. The biomethane will be odorized through a bypass prior 

to injection into the distribution system. Terasen Gas will build and operate the odorant injection 

equipment as part of the interconnection facilities. 

Terasen Gas will maintain the odorant equipment, meter and regulator. During the start-up 

phase of the Project, we will retain QuestAir to maintain the upgrading equipment. The facility 

will be monitored by our Gas Control department. Terasen Gas and Metro Vancouver staff will 

be trained to operate the equipment. We will also include procedures in our Emergency 

Response Plan. 

Third, with respect to gas quality, the biomethane will meet the specifications of the West Coast 

Energy Inc. tariff, which is the standard on which Terasen Gas receives gas into its transmission 

and distribution system. In addition, bacteria will be removed from the raw biogas in the 

upgrading process. 

During the months following start-up, we will frequently monitor the gas quality received from the 

Lions Gate WWTP, at the outlet of the upgrading plant and at points along the distribution 

system within the area. The monitoring is intended to confirm the assumptions used for this 

Project as well as providing data to allow for quality control and operational adjustments. 

Fourth, with respect to system risk, in the unlikely event that the biomethane was to negatively 

affect the quality of gas being consumed in customers’ appliances the overall impact would be 

manageable. Low volumes of biomethane will be produced and injected into the distribution 

infrastructure. System analysis of the surrounding distribution network indicates that the 

maximum number of customers that could be burning the biomethane is approximately 120. 

While it is not anticipated that the biomethane will result in customers noticing any difference in 

the operation of their appliances or any adverse impacts, one of the key objectives of the pilot is 

to prove this out so that future larger scale projects can move forward with confidence. 

5.4 Supply Risk 

We have managed supply risk through the Biomethane Project Agreement with Metro 

Vancouver, discussed in the next section of this Application. 

Metro Vancouver’s longer term plans for the Lions Gate WWTP are uncertain at this time. It is a 

relatively small facility that may be closed and/or replaced within the 10 to 20 year timeframe. If 

changes to Metro Vancouver’s plans resulted in early closure of the Lions Gate WWTP the 

potential impact on viability of the biogas upgrading project is not large and can be mitigated. 

The Terasen Gas-owned upgrading facilities are being depreciated over the 15-year contract life 

and so the assets are likely to be substantially depreciated by the time such plan changes would 

Page 11



occur. Further, the upgrading facilities will be skid mounted and it will likely be possible to 

redeploy these assets at another biogas upgrading project site. 

6.0 The Lions Gate WWTP Biomethane Project Agreement 

TGI is seeking approval pursuant to Section 71 of the UCA of the Lions Gate WWTP 

Biomethane Project Agreement, which is an energy supply contract with Metro Vancouver for 

biogas from the Lions Gate WWTP. The Agreement is found in Appendix 2 of the Application. 

The Agreement reflects the cooperative working arrangement developed between TGI and 

Metro Vancouver and is reasonable and appropriate for allowing the Project to be developed as 

a biogas demonstration project. The Agreement is consistent with “government’s energy 

objectives” for the reasons described in Section 2 of this Application. 

The following are highlights of the components of the Agreement. 

1. The Agreement sets out that the biogas in excess of Metro Vancouver’s own needs of 

approximately 58% of the Lions Gate WWTP biogas production at the will be made 

available to Terasen Gas for upgrading to biomethane. 

2. The term of the agreement is for fifteen years from the Effective Date (unless early 

termination occurs according to provisions in the agreement.) 

3. The Agreement sets out the roles and responsibilities of Metro Vancouver and Terasen 

Gas. Metro Vancouver agrees to maintain the Lions Gate WWTP in a manner that 

maintains the quantity and quality of excess biogas and that it will not install new 

equipment intended to increase the consumption of biogas at the plant. 

4. Terasen Gas is responsible for the costs related to designing, building, operating and 

maintaining the biogas upgrading facilities within certain portions of the Lions Gate 

WWTP site defined as the “Project Area”. 

5. Various terms deal with reports, information and plans that must be provided by one 

party to the other and approvals that must be obtained before proceeding with the plans. 

6. Various terms set out the conditions of access to the Lions Gate WWTP by Terasen 

agents, employees, contractors and subcontractors and that permission must be 

obtained before bringing guests or visitors to the plant. 

7. The Agreement sets out that Metro Vancouver will provide the biogas to Terasen Gas at 

no charge unless Net Revenues, as defined in the Agreement, are greater than zero. 

There is not a significant likelihood that Net Revenues will be greater than zero before 

the upgrading facilities are fully depreciated. If circumstances occur where Net 

Revenues are greater then zero then Net Revenues will be shared. 8 

The fact that, under the Agreement, the raw biogas is being provided to TGI without charge 

(other than in the unlikely circumstances outlined in point 7 above) gives the Project a solid 

foundation and makes it an ideal candidate as a biogas demonstration project. The Agreement 

8 

The Agreement describes the sharing arrangement in greater detail. The Agreement has been filed separately on a 

confidential basis. 

Page 12



reflects the desire of both TGI and Metro Vancouver for the Project to succeed and produce the 

anticipated technical lessons learned and GHG benefits outlined in Section 4.0 of this 

Application. Both parties are interested in understanding the potential for future biogas projects. 

We have every expectation that the parties to the Agreement will continue to work 

collaboratively to ensure the success of the Project. 

7.0 Regulatory and Financial Treatment of Project Costs and Biomethane 

Volumes 

We are proposing to track separately the costs of biomethane development and procurement, 

as part of the purpose of the Project is to understand the associated costs. We are seeking 

approval pursuant to Section 60 of the UCA to charge the costs of service (and volumes) for the 

Project to the Company’s Midstream Cost Reconciliation Account (MCRA) and recover these 

costs from customers through the Midstream Cost Recovery Charge. It is efficient to use 

existing regulatory and financial constructs for this low volume demonstration Project. The 

proposed regulatory and financial treatment appropriately recognizes the Project as a new 

supply source into TGI's system. We are considering other alternative financial and regulatory 

treatment for future projects, but the proposed approach is most suitable in the circumstances. 

7.1 Tracking of Costs 

The Company’s investment in biogas upgrading equipment at the Lions Gate WWTP will be 

tracked in separate asset accounts. Further, operating and maintenance costs and any other 

costs pertaining to the acquisition and upgrading of biogas to suitable quality for injection into 

the Terasen Gas system will be recorded in separate accounts. The separate tracking of 

biomethane costs will enable an overall calculation of the cost of service and average unit cost 

of biomethane, as discussed in section 7.2. 

Since the raw biogas is being acquired from Metro Vancouver at no charge, the costs of service 

for the Project are those associated with the biogas upgrading facilities to be owned and 

operated by Terasen Gas. The components of the overall biomethane costs will be as follows: 

o Terasen Gas capital costs of biogas upgrading equipment to be recorded in the 

appropriate Products Extraction Plant accounts (Accounts 420 - 429 in the BCUC 

Uniform System of Accounts for Gas Utilities).` 

o Operating & maintenance costs, depreciation expense and any property taxes related to 

biogas upgrading and connecting facilities will be recorded in appropriate accounts 

corresponding to the asset accounts. 

o Biogas and biomethane purchase costs will be recorded in separate commodity 

accounts. The Agreement with Metro Vancouver (attached as Appendix 2) does not 

include any payments being made by Terasen Gas for the raw biogas for the first 

number of years. After the upgrading facilities have been fully depreciated there is the 

possibility that some payments will be made for to Metro Vancouver under the benefits 

sharing provisions of the Agreement. Future contracts in respect of other bioenergy 

developments will potentially include costs associated with either raw biogas or 

upgraded biomethane purchases. 

Page 13



7.2 Determination of Cost of Service 

All of the separately-tracked costs for biogas upgrading at Lions Gate WWTP will be used to 

determine an overall cost of service for the Project. The elements of the cost of service, which 

will be recalculated annually, are described below: 

o Return on the biogas rate base will be determined in the normal fashion using the 

approved Terasen Gas capital structure, debt rates and return on equity. Any future 

approved changes to TGI’s capital structure and return on equity will be reflected in the 

return on rate base of the Lions Gate assets. 

o Depreciation expense for the Terasen-owned upgrading facilities at Lions Gate WWTP 

will be based on a 6.67% depreciation rate. The 6.67% depreciation rate has been 

adopted to reflect the term of the contract with Metro Vancouver. The depreciation rate is 

also consistent with the expected service life of the upgrading equipment which is in the 

range of 15 to 20 years. If the Lions Gate WWTP ceases to operate or the 

demonstration Project is discontinued for any reason there is a reasonable likelihood 

that the assets will have useful life remaining and can be redeployed at another biogas 

upgrading site. 

o Income taxes will be determined in the same fashion as with other TGI revenue 

requirement / cost of service filings. The effects of depreciation expense and capital cost 

allowance on the income tax calculation will be based on the specific depreciation rates 

and capital cost allowance classes for the Terasen-owned biogas upgrading facilities. 

o Operating and maintenance expenses for the Lions Gate upgrading facilities are 

estimated to be about $40,000 annually. These are for electrical power, measurement 

and monitoring of the biogas flows and quality, replacement of consumable media, 

telecommunications costs, equipment maintenance and general maintenance around 

the facilities. Property taxes for the biogas upgrading facilities are not expected to be 

material but will be included in the biomethane cost of service to the extent that any 

incremental property taxes are incurred. 

o If and when there are purchase costs for raw biogas or upgraded biomethane these 

costs (and volumes) will also be included in the overall cost of service for biomethane. 

o The upgraded biomethane volumes injected into the Terasen Gas system from the Lions 

Gate WWTP will be exempt from the BC Carbon Tax. Any benefit of the carbon tax 

exemption will be netted against the overall cost of service of the upgraded biomethane. 

A financial model of the Project incorporating all the above elements is attached to this 

application as Appendix 5 9 

. The forecast average cost of the product biomethane based on the 

assumptions employed is $13.64 / GJ over the life of the project. While the biomethane supply 

from the Project is more costly than natural gas in current market conditions the annual volumes 

9 Appendix 5 provides an analysis of the Project on both a cost of service basis and a cash flow basis. The cash flow 

analysis is provided to comply with the directive in the BCUC Decision on the Fraser River Crossing Upgrade 

Project (Order C-2-09 and Decision dated March 12, 2009, page 49). Since the Project is being advanced as a 

demonstration project and not as a competitive energy supply option the results of the analysis under either basis are 

presented primarily for information purposes. 

Page 14



from the Project are small, representing only about 1/100th of one percent of the Company’s 

core market sales volumes, so the impact on customers will not be significant. We also note that 

there have been periods of volatility and high prices in natural gas markets in the past in which 

gas prices have exceeded the expected average cost of biomethane from the Project. We 

believe the benefits of proceeding with the Project, in terms of gaining knowledge and 

experience with biogas upgrading, and setting the stage for future biomethane developments 

and advancement of "government’s energy objectives", more than outweigh the incremental 

costs associated with the Project. 

7.3 Proposed Financial Treatment and Recovery of Costs through MCRA 

As an initial approach to dealing with the biomethane costs from the Lions Gate facility as 

commodity costs, Terasen Gas proposes to transfer the overall biomethane costs of service and 

volumes into the MCRA on a monthly basis. There are two key reasons why the proposed 

financial treatment and the use of the MCRA are appropriate at this time. 

First, the biomethane from the Project will be a new commodity source and it is appropriate at 

this early stage of biogas supply and market development to use an existing commodity 

mechanism to recover the costs from customers. We considered the potential to develop new 

regulatory and financial structures for this Project, including mechanisms that would allow for 

the segregation of biogas-related costs and permit the biomethane to be sold as a “green” 

offering at a premium versus the regular rates. This may prove to be a viable option in the 

future, but it is premature to implement such structures without the benefit of the anticipated 

“lessons learned” from the Project. Given the Project will be Terasen’s sole source of 

biomethane the lack of supply diversity will make it difficult to manage a “green” offering. A 

“green” offering will be more appropriate at such time as we understand the supply profile and 

have multiple sources of biomethane to manage supply and demand for the “green” offering. . 

Second, the Project costs and volumes associated with the Project are analogous to costs and 

volumes already captured through commodity-related accounts such as the MCRA. The costs 

of service of the upgrading facilities are integral components of the biomethane commodity 

costs. Raw biogas is not of acceptable quality to take into the Company’s distribution system. 

The upgrading facilities in a biomethane project perform the same function of removing 

contaminants from the raw biogas as a natural gas processing plant does for the raw natural 

gas stream. The costs of biogas upgrading are therefore a supply cost component of the 

biomethane just as natural gas processing costs are part of the supply costs of natural gas. 

We have considered whether it would be appropriate to include the biomethane costs in the 

Commodity Cost Reconciliation Account (CCRA) rather than the MCRA but concluded that the 

MCRA is more appropriate. In addition to the reasons outlined above, the biomethane from the 

Lions Gate does not comply with the CCRA requirements to deliver the commodity in certain 

proportions at natural gas market hubs. Unlike CCRA supply contracts, the biomethane supply 

from the Project cannot be characterized as firm baseload supply; the frequency of outages and 

variability in flows of raw biogas from the Project are still unknown. 

Biomethane is exempt from the BC Carbon Tax. 10 

Since the costs of biomethane from the Lions 

Gate WWTP will be recovered from customers through the MCRA and Midstream Charge it is 

10 The Carbon Tax Act contains the following definition of “fuel” for the purposes of determining the carbon tax: 

Page 15



appropriate that the savings from avoided carbon taxes also be passed through in the same 

fashion. 

7.4 Next Steps in Biogas Development and New Regulatory Structures 

We are currently in the process of developing an overall strategy and plan with respect to 

biomethane programs and we expect to bring forward the next phases of our biomethane 

strategy development in our revenue requirement application to be filed later in 2009. We 

recently received nine (9) expressions of interest in its Biogas Request for Expressions of 

Interest (“RFEOI”) process. Evaluation and development of these expressions of interest will 

continue to occur over the coming months but the results of that evaluation will inform 

expectations about the future development of biomethane supplies in BC. 

A related element of our assessment of biogas opportunities will be the potential to develop new 

regulatory and financial structures tailored to biogas supply. This analysis will include 

mechanisms that would allow for the segregation of biogas-related costs and permit the biogas 

to be sold as a “green” offering at a premium versus the regular rates. 

8.0 Other Permits and Approvals 

We have made an assessment of other permits and approvals that will be required for the 

Project and do not anticipate that these will pose a hindrance to the Project proceeding. These 

are as follows. 

The Project is regulated from a technical perspective by the Oil and Gas Commission (“OGC”) 

which follows the CSA Z662 code. The OGC determines in its approval whether environmental 

or archaeological reviews are required. Since the Project is located on the existing site of the 

Lions Gate WWTP and there are no archaeological sites on that land these reviews are not 

expected to be required. Based on our experience in working with the OGC and the particular 

circumstances of the Project we expect that OGC approval will be obtained in a timely fashion in 

the normal course of business. 

A Building Permit must be obtained from the City of West Vancouver. The City of West 

Vancouver handles building code compliance on its own behalf and on behalf of the Squamish 

Nation where Squamish Nation interests are involved. Given the Squamish Nation support for 

the Project (discussed in Sections 5.2 and 9) we believe that obtaining the building permit 

should be a straightforward matter. 

Since the lands occupied by the Lions Gate WWTP are adjacent to the shoreline of Burrard Inlet 

we are presently confirming whether notification or information must be provided to bodies with 

jurisdiction over the local marine environment such as Port Metro Vancouver or the Department 

"fuel" means a substance set out in column 2 of the Table in Schedule 1 but does not include 

(a) ethanol or methanol produced from biomass, 

(b) biodiesel and other biofuels, and 

(c) methane produced by waste in a landfill; 

Page 16



of Fisheries and Oceans Given the Project’s offset from the marine foreshore environment, it 

is not anticipated that any review of the Project required by these bodies will be onerous. 

Once the Project is constructed and ready to begin operating, a pressure vessel operating 

permit must be obtained from the BC Safety Authority. This is a normal course permit that 

Terasen Gas obtains regularly in carrying out its operations. We do not expect any impediments 

in obtaining this permit. 

9.0 Consultation 

TGI has worked cooperatively with Metro Vancouver, the operator of the facility, as is evidenced 

by the Agreement. The Province has indicated its support through providing funding for the 

Project. 

Consultation with the Squamish Nation has taken place in a manner, and to an extent that 

appropriately recognizes the Squamish Nation's ongoing interest in the Project lands but also 

the limited potential for the Project to adversely affect the nearby Reserve or any asserted 

aboriginal rights and title beyond the Reserve lands. The Project is located on previously 

disturbed land entirely within the existing Lions Gate WWTP. The Lions Gate WWTP is 

physically removed from surrounding residences or businesses. The Project facilities are 

mounted on a skid. As such, the Project is unlikely to have any physical impact on the 

surrounding areas, or the land itself. The Project will reduce the need for flaring of raw biogas. 

Metro Vancouver has provided the Squamish Nation of notice of its intention to enter into an 

agreement with Terasen Gas to locate the Project facilities on the grounds of the Lions Gate 

WWTP. Terasen Gas in turn has provided written notification to the Squamish Nation regarding 

the facility. Terasen Gas and Metro Vancouver met with the Squamish Nation on March 4, 2009 

to discuss the Project. The Squamish Nation was supportive of the Project. 

We will continue to work to address any issues raised by the Squamish Nation. 

10.0 Conclusion 

The Project represents a significant first step in the development of biogas as a new source of 

renewable energy to meet our customers’ changing expectations and “government’s energy 

objectives”. TGI, as the major natural gas utility in British Columbia and the local natural gas 

distribution provider in the vicinity of the Lions Gate WWTP, is uniquely positioned to invest in 

the Project and promote the development of biogas upgrading in BC. The Project, and the 

associated Agreement, is consistent with the 2007 BC Energy Policy, the province’s Bioenergy 

Strategy and "government’s energy objectives" as set out in the Act. The proposed financial and 

regulatory treatment is appropriate in the circumstances of this Project. 

Terasen Gas respectfully requests that the Commission grant the orders as sought in this 

Application. 

Page 17

Appendix 1 

DRAFT ORDERS

SIXTH FLOOR, 900 HOWE STREET, BOX 250 

VANCOUVER, B.C. V6Z 2N3 CANADA 

web site: http://www.bcuc.com 

IN THE MATTER OF 

the Utilities Commission Act, R.S.B.C. 1996, Chapter 473 

and 

Order No. G-XX-0X 

Page 1 of 4 

TELEPHONE: (604) 660-4700 

BC TOLL FREE: 1-800-663-1385 

FACSIMILE: (604) 660-1102 

An Application by Terasen Gas Inc. 

for a Certificate of Public and Convenience and Necessity 

for the Lions Gate Waste Water Treatment Plant Biogas Upgrading Demonstration Project 

and 

for approval of an Energy Supply Contract for Biogas from the Lions Gate Waste Water Treatment Plant 

BEFORE: 

WHEREAS: 

(Date) 

A. On April 9, 2009, Terasen Gas applied, pursuant to sections 45 and 46 of the Utilities Commission Act 

(the “Act”), for a Certificate of Public Convenience and Necessity (“CPCN”) (the “Application”) to construct 

and operate the biogas upgrading facilities at Metro Vancouver’s Lions Gate Waste Water Treatment Plant 

(“Lions Gate WWTP”) as a demonstration Project (the “Project”); and 

B. The Project, involves the installation at the Lions Gate WWTP of a small, skid-mounted plant to recover 

pipeline-grade biomethane from the raw biogas produced by Lions Gate WWTP and inject the pipelinegrade 

biomethane into TGI’s local distribution pressure gas line serving the Lions Gate WWTP; and 

C. The Government of British Columbia has demonstrated its support of the Project through the awarding 

Innovative Clean Energy funding of $ 366,000 in July 2008. The Ministry of Agriculture and Lands has also 

indicated support of biogas projects so that lessons learned from projects such as the Lions Gate project can 

be applied to the agriculture sector to reduce GHG emissions from agricultural practices. 

D. The Project has a direct capital cost of approximately $1.7 million (offset by funding from the Province in the 

amount of approximately $366,000); and





Page 2 of 4 

TELEPHONE: (604) 660-4700 

BC TOLL FREE: 1-800-663-1385 

FACSIMILE: (604) 660-1102 

E. TGI also applies pursuant to section 71 of the Act for approval of an energy supply contract with Greater 

Vancouver Sewerage and Drainage District ("Metro Vancouver") for raw biogas from the Lions Gate WWTP 

in the form included as Appendix 1 to the Application; and 

F. TGI seeks approval pursuant to sections 59-61 of the Act to charge the costs (and volumes) of service for the 

Project (including the return on rate base, depreciation expense, operating and maintenance expenses, 

property taxes and income taxes) to the Midstream Cost Reconciliation Account and recover these costs 

from customers through the Midstream Cost Recover Charge; and 

G. TGI states that the Project is a significant first step in the development of a new source of renewable energy 

to meet evolving customer expectations and is consistent with the 2007 BC Energy Policy, the Province’s 

Bioenergy Strategy and the “government’s energy objectives” as set out in the Act; and 

H. TGI states that while the cost of the biomethane yielded by the Project is greater on a per GJ basis than the 

current cost of gas acquired by TGI for its customers, the impact on rates will be negligible and will be 

outweighed by the significant learning benefits of having a practical application of biogas upgrading in 

service; and 

I. TGI states that appropriate consultation in respect of the Project has been undertaken with the Squamish 

Nation; and 

J. TGI has advised that notice of this Application has been provided to participants in TGI's 2008 Annual Review 

and intervenors in TGI's most recent Resource Plan; and 

K. TGI considers that a written hearing process is appropriate for the review of the Application and proposes a 

regulatory timetable; and 

L. The Commission considers that establishing a Regulatory Timetable for the registration of Intervenors and 

for the review of the Application is necessary and in the public interest.; and 

M. The Commission has reviewed the Application and considers that a written public hearing process is 

required. 

NOW THEREFORE the Commission orders as follows: 

1. The Application will be examined by a written public hearing process in accordance with the 

Regulatory Timetable attached as Appendix A.





Page 3 of 4 

TELEPHONE: (604) 660-4700 

BC TOLL FREE: 1-800-663-1385 

FACSIMILE: (604) 660-1102 

2. The Application, together with any supporting materials, will be made available for inspection at 

the TGI Office, 16705 Fraser Highway, Surrey, BC, V4N 0E8 and at the British Columbia Utilities 

Commission, Sixth Floor, 900 Howe Street, Vancouver, B.C., V6Z 2N3 and will also be available on 

the TGI website. 

3. Intervenors or Interested Parties should register with the Commission, in writing or electronic 

submission, by Friday May 1, 2009. Intervenors should specifically state the nature of their interest 

in the Application and identify the extent of their anticipated involvement in the review process. 

DATED at the City of Vancouver, In the Province of British Columbia, this 24th day of April, 2009. 

Attachment 

BY ORDER




REGULATORY AGENDA AND TIMETABLE 

APPENDIX A 

to Order No. G-XX-0X 

Page 4 of 4 

TELEPHONE: (604) 660-4700 

BC TOLL FREE: 1-800-663-1385 

FACSIMILE: (604) 660-1102 




and 


ACTION 

DATES (2009) 

Commission Issues Procedural Order Friday, April 24 

Intervenor Registration Friday, May 1 

Application Workshop (if desired) Thursday, May 7 

Commission Information Request No. 1 Monday, May 11 

Intervenor Information Request No. 1 Friday, May 15 

TGI Response to Intervenor IR No. 1 and Commission IR No.1 Friday, May 29 

Intervenor Submissions Friday, June 12 

TGI Submissions and Reply Friday, June 23 

Anticipated Commission Decision July




IN THE MATTER OF 

The Utilities Commission Act, R.S.B.C. 1996 Chapter 473 

and 




Page 1 of 2 

TELEPHONE: (604) 660-4700 

BC TOLL FREE: 1-800-663-1385 

FACSIMILE: (604) 660-1102 


and 


BEFORE: 

A. On April 14, 2009, Terasen Gas Inc. (“TGI”) applied to the British Columbia Utilities Commission (the 

“Commission”), pursuant to sections 45 and 46 of the Utilities Commission Act (the “Act”), for a 

Certificate of Public Convenience and Necessity (“CPCN”) for the Lions Gate Waste Water Treatment 

Plant (“Lions Gate WWTP”) Biogas Upgrading Demonstration Project (the “Project”); 

B. The Project, which has a direct capital cost of approximately $1.7 million (offset by funding from the 

Province in the amount of approximately $366,000), involves the installation at the Lions Gate 

WWTP of a small, skid-mounted plant to recover pipeline-grade biomethane from the raw biogas 

produced by Lions Gate WWTP and inject the pipeline-grade biomethane into TGI’s local distribution 

pressure gas line serving the Lions Gate WWTP; 

C. TGI also applies pursuant to section 71 of the Act for approval of an energy supply contract with 

Greater Vancouver Sewerage and Drainage District ("Metro Vancouver") for raw biogas from the 

Lions Gate WWTP in the form included as Appendix 1 to the Application; 

D. TGI seeks approval pursuant to sections 59-61 of the Act to charge the costs (and volumes) of 

service for the Project (including the return on rate base, depreciation expense, operating and 

maintenance expenses, property taxes and income taxes) to the Midstream Cost Reconciliation 

Account and recover these costs from customers through the Midstream Cost Recover Charge;





Page 2 of 2 

TELEPHONE: (604) 660-4700 

BC TOLL FREE: 1-800-663-1385 

FACSIMILE: (604) 660-1102 

E. TGI states that the Project is a significant first step in the development of a new source of renewable 

energy to meet evolving customer expectations and is consistent with the 2007 BC Energy Policy, 

the Province’s Bioenergy Strategy and the “government’s energy objectives” as set out in the Act; 

F. TGI states that while the cost of the biomethane yielded by the Project is greater on a per GJ basis 

than the current cost of gas acquired by TGI for its customers, the impact on rates will be negligible 

and will be outweighed by the significant learning benefits of having a practical application of biogas 

upgrading in service; 

G. TGI states that appropriate consultation in respect of the Project has been undertaken with the 

Squamish Nation; 

H. By Order dated , 2009, the Commission determined that the Application would be examined 

by a written public hearing process, and established a Regulatory Timetable; 

I. Submissions in the proceeding concluded with TGI’s Reply Submission on , 2009; and 

J. The Commission Panel has considered the Application and the evidence and submissions in the 

proceeding and has determined that the Project and associated energy supply contract for biogas 

are in the public interest and that the orders sought by TGI should be granted for the reasons set 

out in the Reasons for Decision that accompany this Order. 

NOW THEREFORE pursuant to sections 45, 46, 59-61 and 71 of the Act, the Commission orders as 

follows: 

1. A Certificate of Public Convenience and Necessity is granted to TGI to construct and operate the 

Project, and the net capital cost incurred by TGI of approximately $1.33 million (representing $1.7 

million direct project cost, less a $0.366 million contribution from the Province’s Innovative Clean 

Energy Fund) is to be added to rate base. 

2. The energy supply contract with Metro Vancouver for biogas from the Lions Gate WWTP, 

substantially in the form included as Appendix 1 to the Application, is approved. 

3. TGI shall charge the costs of service (and volumes) for the Project (including the return on rate base, 

depreciation expense, operating and maintenance expenses, property taxes and income taxes) to 

TGI’s Midstream Cost Reconciliation Account and recover these costs from customers through the 

Midstream Cost Recovery Charge. 

DATED at the City of Vancouver, in the Province of British Columbia, this day of , 2009

Appendix 2 

TERASEN GAS – METRO VANCOUVER ENERGY SUPPLY 

AGREEMENT 

(filed Confidentially under separate cover)

Appendix 3 

TECHNICAL APPENDIX

Appendix 3 

Technical Appendix 

Upgrading of Anaerobic Digester Gas at Waste Water Treatment 

Plants 

Biogas generated from the anaerobic digestion of municipal waste has been typically 

used to generate electricity and heat, which are used on-site at the waste water 

treatment plant to reduced net power and heating costs. However, recently there has 

been a growing interest in the upgrading of raw biogas for sale either as pipeline quality 

gas, or a compressed natural gas (CNG) vehicle fuel. A number of biogas upgrading 

projects have been installed in Europe, including several projects in Sweden that 

produce both pipeline grade gas and CNG vehicle fuel. 

Biogas Upgrading Process and Related Equipment 

The biogas upgrading equipment for the Lions Gate Project will be purchased as a 

complete skid mounted unit from QuestAir. Figure 1 provides a detailed illustration of 

the equipment and process included on the skid used to upgrade the raw biogas top 

pipeline quality gas. Figure 2 is a representative illustration of the complete skid 

mounted package. The overall dimensions of the skid are 24’ x 8’. 

Figure 1 – Equipment Included on Skid 

(Pre-treatment) 

(Compression) 

(Methane Separation) 

Page 1

Figure 2 – Conceptual Illustration of the Biogas Upgrading Plant 

A simplified flow diagram of the major processes included in the proposed biogas 

upgrading plant is shown in Figure 3. The key unit operations involved in the biogas 

upgrading plant are: 

i. Pretreatment (B) to remove water and minor contaminants such as hydrogen 

sulphide (H2S) and siloxanes from the feed gas. 

ii. A compressor (C) to provide sufficient pressure to allow the efficient separation 

of biomethane from carbon dioxide in the PSA (Pressure Swing Adsorption) 

process 

iii. QuestAir’s M-3200 methane purifier (D) 

iv. Interconnection Facilities (E) to measure the quality and quantity of biomethane 

entering the Terasen Gas distribution system 

Page 2

Figure 3 - Biogas Upgrading Flowchart 

(A) 

(B) 

Anaerobic 

Digester 

Pre-treatment 

Compressor 

Table 1 illustrates a typical composition of raw biogas as well as natural gas. The pretreatment 

of the raw biogas is required to remove contaminants such as hydrogen 

Sulphide (H2S). The gas is then compressed to approximately 125 psig as required by 

QuestAir’s Pressure Swing Adsorption equipment that subsequently separates the 

methane (CH4) and carbon dioxide (CO2). The CO2 and a small quantity of methane are 

sent to the flare while the remaining methane is sent through the interconnection 

facilities and into Terasen Gas’ distribution infrastructure. 

Table 1 - Typical Gas Composition 

Raw Biogas Natural Gas 

40-60% CH4 >96% CH4 

30-50% CO2

• Raw biogas is introduced under pressure into an 

adsorber vessel. Impurities in the raw biogas, 

including (CO2) and water vapour (H2O) are 

adsorbed onto the surface of the solid adsorbent 

material present in the adsorber vessels. 

• Purified produce methane exits the top of the 

adsorber vessel, and flows to the product of the 

PSA. 

• The pressure in the adsorber vessel is then 

reduced, and the contaminants (CO2, H2O) are 

released from the surface of the adsorbent, 

regenerating the adsorbent for another PSA cycle. 

The contaminant gases exit the bed, and report to 

the ‘exhaust’ or waste stream of the PSA system. 

• A small amount of product methane is then used to 

High 

Pressure 

CH 4 CH4 Purge 

CH 4, CO 2, 

H 2O 

Adsorbent 

Beds 

purge the depressurized bed, bringing the bed into condition for another PSA 

cycle. 

It is necessary to go through multiple PSA cycles to achieve an adequate level of gas 

purity. The simplified PSA cycle shown in Figure 4 is therefore repeated in a semi-batch 

manner through all of the adsorber vessels in the installation. 

At present, QuestAir has PSA systems operating on landfill gas (Cincinnati, OH) and on 

anaerobic digester gas generated from agricultural waste (Fennville, MI; Salzburg, 

Austria; Widnau, Switzerland). In addition, QuestAir has another 5 methane recovery 

systems currently being manufactured or installed at digester gas projects in Europe and 

North America. 

Page 4 

CO 2, H 2O 

Low 

Pressure

Appendix 4 

CAPITAL COST DETAIL

PROJECT COST ESTIMATE QUESTAIR INC. 

PROJECT NAME: LIONS GATE WWTP 3FEB09 GAS TYPE 

PROJECT NUMBER: 8274 DIGESTER 

COST CODE 

05 

PLANT ENGINEERING EST PRICE 

06 QAR PROJECT MANAGEMENT $28,000 

07 

10 

CUSTOMER TRAINING PROGRAM DEVELOPMENT $4,054 

A 

E 

TRAVEL, PER DIEM, MILEAGE $0 

PLANT ENGINEERING SUPPORT SUB-TOTAL $32,054 

COST CODE PLANT EQUIPMENT & FABRICATION EST PRICE 

PSA EQUIPMENT $117,450 

20 FABRICATION SUPPORT ON SITE $5,962 

21 PURCHASED EQUIPMENT 

A INLET KO DRUM $4,888 

B COMPRESSOR $72,536 

C H2S REMOVAL EQUIPMENT AND FILL $96,000 

D AIR COOLED EXCHANGERS $23,751 

E POST COMPRESSOR SEPARATOR KO DRUM $4,637 

F INSTRUMENT AIR PACKAGE $12,053 

G FILTERS $4,266 

H CONDENSATE PUMP $1,258 

I EXHAUST BLOWER $62,767 

J ANALYZERS $65,662 

K PROGRAMMING $45,000 

22 PIPING $62,011 

23 VALVES $36,526 

24 ELECTRICAL, CONTROLS, INSTRUMENTATION $95,000 

25 STRUCTURAL $25,834 

26 TESTING & INSPECTION $10,557 

27 MANUFACTURING SUPPORT REMOTE $6,210 

28 INSULATION $20,000 

29 EQUIPMENT SHIPPING TO QAR/FABRICATOR $16,000 

30 TRAVEL, PER DIEM, MILEAGE $0 

PRICE BREAKOUT LIONS GATE 9MAR09 

PLANT EQUIPMENT & FABRICATION SUPPORT SUB-TOTAL $788,367 

PLANT ENGINEERING, EQUIPMENT & FABRICATION TOTAL $820,421

Appendix 5 

FINANCIAL SCHEDULES

Appendix 5 Lions Gate WWTP Biomethane Project 

APPENDIX 5 

Table of Contents 

Page 

Financial Assumptions 1 

Table 1 Cost of Service Summary 3 

Table 2 Rate Base Summary 4 

Table 3 Cash Flow Summary 5 

Appendix 5 – Financial Schedules Page i


Financial Assumptions 

Depreciation 

• Biogas upgrader: 15 years or 6.67% per year 

• TGI interconnect: 15 years or 6.67% per year 

Taxes 

• Combined Federal / Provincial: 30% (2009), 28.5% (2010), 26.5% (2011), 25% (2012+) 

• Capital Cost Allowance: 

o Biogas upgrader - Class 43.1 (30%) 

o TGI Interconnect - Class 51 (6%) 

Cost of Capital 

• Debt / Equity Split: 65% / 35% 

• Return on Equity: 8.47% 

• Debt Costs: 6.72% 

Rate Base Additions 

• All equipment in service September 1, 2009 

O&M 

• $40,000 per year (2009$) 

• Inflated at 2% per year 

Biomethane Production 

Carbon Tax 

Raw biogas production (m 3 /hr) 1 80 

CH4 composition % of raw biogas 60 

CH4 recovery % 85 

Upgraded biogas production (m 3 /hr) 40.80 

Heating value (MJ/m 3 ) 36.00 

Hours per day 24 

Days per year 365 

Energy per year (GJ/yr) 12,867 

Note 1: Excess to Metro Vancouver's needs at the Lions Gate WWTP 

July 1, 2008 to June 30, 2009 $0.50 / GJ 

July 1, 2009 to June 30, 2010 $0.75 / GJ 

July 1, 2010 to June 30, 2011 $0.99 / GJ 

July 1, 2011 to June 30, 2012 $1.24 / GJ 

After July 1, 2012 $1.49 / GJ 

Appendix 5 – Financial Schedules Page 1


Capital Cost Estimate 

Questair Costs 

Item Cost 

Design $170,000 

Upgrading facilities 820,000 

Support 35,000 

Commissioning 165,000 

Sub Total - Questair 1,190,000 

Terasen Gas Costs 

Metering, regulating and odourizing skid 80,000 

Site facilities 118,000 

Geotechnical & foundations 54,300 

Sub Total - Terasen Gas 252,300 

Metro Vancouver costs 145,700 

Total Capital Cost (before PST) 1,588,000 

PST 111,160 

Total Capital Cost $1,699,160 



Table 1 

Lions Gate Wastewater Treatment Plant Biomethane Project 

Cost of Service Summary ($Thousands) 

Calendar Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 

1 2 3 4 5 6 7 8 9 10 11 

1 Operating & Maintenance 13 41 42 42 43 44 45 46 47 48 49 

2 Depreciation 0 91 91 91 91 91 91 91 91 91 91 

3 Income Tax (63) (58) (25) (6) 6 14 20 23 26 27 28 

4 Property Tax 0 0 0 0 0 0 0 0 0 0 0 

5 Interest Expense 18 57 53 49 46 42 38 34 30 26 22 

6 Return on Equity 12 39 36 34 31 28 26 23 20 17 15 

7 Total Cost before Carbon Tax Savings('000$) (19) 170 197 210 216 219 219 217 213 209 204 

8 Upgraded Biogas 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 

9 Biogas 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 

10 Carbon Tax Savings (3) (11) (14) (18) (19) (19) (19) (19) (19) (19) (19) 

11 Total Cost after Carbon Tax Savings('000$) (22) 159 183 193 197 200 199 197 194 190 185 

12 Biogas 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 

2020 2021 2022 2023 2024 

Cost of Service Summary (continued) 12 13 14 15 16 

1 Operating & Maintenance 50 51 52 53 54 

2 Depreciation 91 91 91 91 91 

3 Income Tax 28 28 28 28 27 

4 Property Tax 0 0 0 0 0 

5 Interest Expense 18 14 10 6 2 

6 Return on Equity 12 9 7 4 1 

7 Total Cost before Carbon Tax Savings('000$) 199 193 187 181 175 

8 Upgraded Biogas Production sent to Terasen (GJ) 12,867 12,867 12,867 12,867 12,867 

9 Biogas Avg Cost before Carbon Tax Savings ($/GJ) 15.44 15.01 14.55 14.09 13.62 

10 Carbon Tax Savings (19) (19) (19) (19) (19) 

11 Total Cost after Carbon Tax Savings('000$) 180 174 168 162 156 

12 Biogas Avg Cost after Carbon Tax Savings ($/GJ) 13.96 13.52 13.07 12.60 12.13 

(2009-24) 

13 Before Carbon Tax Savings 

14 After Carbon Tax Savings 

Levelized Biogas Cost ($/GJ) 

$15.00 

$13.64 

PV Cost of Service ('000$) 

1,876 

1,705 



Table 2 

Lions Gate Wastewater Treatment Plant Biomethane Project 

Rate Base Summary ($Thousands) 

Calendar Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 

1 2 3 4 5 6 7 8 9 10 11 

1 Plant $531 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 

2 Contribution (113) (366) (366) (366) (366) (366) (366) (366) (366) (366) (366) 

3 Accumulated Depreciation / Amortization 0 (45) (136) (227) (317) (408) (499) (590) (680) (771) (862) 

4 Working Capital 0 0 0 0 0 0 0 0 0 0 0 

5 Total Rate Base $419 $1,315 $1,224 $1,134 $1,043 $952 $862 $771 $680 $590 $499 

Plant Summary 

6 Opening $0 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 $1,726 

7 Additions 1,726 0 0 0 0 0 0 0 0 0 0 

8 Ending 1,726 1,726 1,726 1,726 1,726 1,726 1,726 1,726 1,726 1,726 1,726 

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 

2020 2021 2022 2023 2024 

Rate Base Summary (continued) 12 13 14 15 16 

1 Plant $1,726 $1,726 $1,726 $1,726 $1,726 

2 Contribution (366) (366) (366) (366) (366) 

3 Accumulated Depreciation / Amortization (952) (1,043) (1,134) (1,224) (1,315) 

4 Working Capital 0 0 0 0 0 

5 Total Rate Base $408 $317 $227 $136 $45 

Plant Summary 

6 Opening $1,726 $1,726 $1,726 $1,726 $1,726 

7 Additions 0 0 0 0 0 

8 Ending 1,726 1,726 1,726 1,726 1,726 

9 Average Plant in Service $1,726 $1,726 $1,726 $1,726 $1,726 



Table 3 

Lions Gate Wastewater Treatment Plant Biogas Methane Project 

Cash Flow Summary ($Thousands) 

Calendar Year 2009 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 

1 2 3 4 5 6 7 8 9 10 11 

1 Lionsgate Biogas Equipment 1,699 0 0 0 0 0 0 0 0 0 0 

2 ICE Funding (366) 0 0 0 0 0 0 0 0 0 0 

3 Net Capital 1,333 0 0 0 0 0 0 0 0 0 0 

4 Terminal Value 

5 Operating & Maintenance 0 13 41 42 42 43 44 45 46 47 48 

6 Taxes 0 (52) (90) (63) (46) (37) (30) (26) (22) (20) (19) 

7 Total Cash Flow ('000$) 1,333 (39) (49) (22) (4) 7 14 20 24 27 29 

2019 2020 2021 2022 2023 2024 

Cash Flow Summary (continued) 12 13 14 15 16 17 

1 Lionsgate Biogas Equipment 0 0 0 0 0 0 

2 ICE Funding 0 0 0 0 0 0 

3 Net Capital 0 0 0 0 0 0 

4 Terminal Value 0 

5 Operating & Maintenance 49 50 51 52 53 54 

6 Taxes (18) (17) (16) (16) (16) (16) 

7 Total Cash Flow ('000$) 31 33 34 36 37 38 

8 PV Cash Flow (2009-24) 1,401

Lions Gate Biogas Application - FortisBC

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