Second floating LNG terminal eyed for Kitimat at Douglas Channel log sort

PNG Pipeline Looping Project map (PNG)
PNG Pipeline Looping Project map (PNG)

A second floating liquified natural gas terminal may be planned for Kitimat, Northwest Coast Energy News has learned.

According to multiple sources in Kitimat, Altagas, the parent company of Pacific Northern Gas plans the terminal at the old log sort site on Douglas Channel, where the barge carrying the liquifaction equipment would likely be moored next door to the already planned BC LNG/Douglas Channel Partners LNG project which would be served by gas delivered by the PNG pipeline system.

Pacific Northern Gas has filed an application with the BC Environmental Assessment Office to construct and operate an approximately 525 kilometre, 610 millimetre (24 inch) diameter natural gas pipeline from the natural gas hub at Summit Lake, near Prince George, to Kitimat that would loop or twin the existing PNG existing natural gas pipeline.

The application to the BCEAO says: “The proposed Project would supply natural gas to proposed liquefied natural gas (LNG) export facilities as well as the Proponent’s existing customers. The proposed Project would include the replacement of four existing compressor stations and would have an initial capacity of 600 million standard cubic feet per day.”

PNG Open House
PNG Pipeline Looping Project Open House at Tamitik. Nov. 26, 2013. (Robin Rowland/Northwest Coast Energy News)

On Tuesday, November 26, Pacific Northern Gas held a sparsely attended open house at Tamitik Arena as part of the BCEAO public comment procedure.

A 38 day public comment period on the application information requirements started on November 25 and will end on January 2, 2014.

At the open house,  PNG officials explained that “looping” means that there would be a second or twin pipeline that would mostly be on a parallel route to the existing pipeline. Since both pipelines would begin at the Summit Lake terminal and end at the Kitimat terminal that is where the term “looping” comes in.

The PNG officials said that the pipeline was initially designed to service the first floating LNG terminal at the old log sort site on Douglas Channel south of Kitimat, but north of the KM LNG site at Bish Cove.

It would be operated by  BC LNG Energy Cooperative, through Douglas Channel Energy Partnership, a partnership with the Haisla Nation and LNG Partners, the energy investors mainly from Texas,

Unlike the bigger project Kitimat LNG or KM LNG, a partnership between Chevron and Apache (and according to reports possibly Sinopec) or the Shell-led partnership LNG Canada, the BC LNG project would allow smaller companies to provide LNG to Asian customers.

At the open house, the PNG officials said the two pipelines could also service “another Kitimat floating LNG project” but declined to give details for confidentiality reasons. The same officials also said the proponent of that project was also looking at Prince Rupert as a possible site for the second floating terminal.

Kitimat sources have confirmed that AltaGas has told them that the company is also considering Prince Rupert as a site for a floating LNG terminal.

However, the current documentation and maps filed with the BCEAO show the PNG looping pipeline terminating at Kitimat, not Prince Rupert.

PNG pipeline map
Detail of the PNG Pipeline Looping proposal. The existing pipeline is shown at the dashed line, the new pipeline is shown in purple. (PNG)

According to the maps filed with the BCEAO and made available at the open house, the new pipeline would not be twinned completely along the existing route across the mountains west of Smithers to Terrace, but would head north at Telkwa parallel to Highway 16 before making its own way through the mountains, crossing the existing pipeline at the Zymoetz River east of Terrace and then taking a westerly route toward Lakelese Lake before joining the existing pipeline corridor along Highway 37.
AltaGas took over Pacific Northern Gas in the fall of 2011.

The Texas-based arm of Douglas Channel Energy partnership, LNG Partners,  is currently in financial difficulty. Reports say that the Texas investors in the company are having difficulty repaying a $22.5 million loan from China’s ENN Group.

The problems currently faced by the Texas group have no affect, at this point, on the Haisla Nation investment in the BC LNG Energy Cooperative. There is already speculation in Kitimat that if the LNG Partners get into further financial difficulty, AltaGas may step in and take over. The would raise the question whether or not there would still be two floating LNG terminals on Douglas Channel, or just the one, as originally planned, but under new ownership.

In it’s project proposal PNG says

The Project will generate approximately 1800-2400 direct person years of employment during construction. Additionally, tax benefits will be generated for Kitimat and the regional districts crossed by the pipeline. PNG anticipates the project will also result in a significant reduction in natural gas transportation rates for its existing customers.

Natural gas transportation costs are a major issue in the northwest, for those costs appear to keep going up while the price of natural gas in North America is generally going down. Natural gas transportation costs in Kitimat spiked after the closure of the Methanex plant and have continued to be quite high, which is just one of the increasing burdens for residents of Kitimat on fixed or low incomes, who are not benefiting as others from the current boom town economy.

Another problem facing PNG is that the new pipeline will cross the traditional territory of the Wet’suwet’en First Nation, where one house, the Unist’ot’en oppose both the Northern Gateway and Pacific Trails Pipeline and have set up a blockade camp on access roads.

The PNG filing with the BCEAO promises consultation with both the Wet’suwet’en Council, and the Office of the Wet’suwet’en, which represents the hereditary chiefs and matriarchs, as well as other First Nations along the proposed route.


PNG Open houses for the project are scheduled for:

Friendship Centre Hall
Thursday, November 28, 2013

Best Western Inn
Monday, December 2, 2013

Hudson Bay Lodge
Tuesday, December 3, 2013

Burns Lake
Chamber of Commerce
Wednesday, December 4, 2013

Summit Lake
Community Hall
Thursday, December 5, 2013


AltaGas signs distribution deal with BC Hydro


Just two days after its friendly take over of Pacific Northern Gas, AltaGas has signed a electricity purchase agreement with BC Hydro.

The deal covers the McLymont Creek and Volcano Creek run-of-river hydroelectric projects. Both are in the traditional territory of the Tahltan First Nation.

Along with a third project,  know as Forest Kerr,  the three projects will total approximately 277 megawatts and are known as “the Northwest Projects.”   The three  will be the anchor tenants for the Northwest Transmission Line, which will upgrade the hydro infrastruture of northern western British Columbia.

 David Cornhill, Chairman and Chief Executive Officer of AltaGas said in a news release

“With a combined capacity of approximately 82 MW the McLymont Creek and Volcano Creek projects, in addition to our 195 MW Forrest Kerr project, represent a $1 billion investment in British Columbia,”. “These three projects align with our strategy of adding low-risk, long-life assets as we continue to build long-term contracted assets that will generate power and deliver strong shareholder value for generations to come.”

The news release also says:

The Northwest Projects will be constructed solely within Tahltan Nation traditional territory. AltaGas and the Tahltan Nation have signed IBAs for all three projects and have established a strong working relationship that will provide the people of the Tahltan Nation with employment, business opportunities, and economic participation. Once completed, the projects will provide enough electricity for approximately 95,000 homes in British Columbia and will offset more than 780,000 tonnes of greenhouse gas equivalents annually.

Cornnhill said the hyro projects will generate more than 400 direct jobs during construction. He added there will be a lot of indirect economic benefits resulting from increased business activities in the area. “Not only will our Northwest Projects help support government job creation strategies but they will also provide much needed power to BC Hydro, which will allow them to meet the growing demand for power in the northwest.”
In a second news release, AltaGas said it will issue 4.27 million common shares to a syndicate of underwriters, co-led by TD Securities Inc. and RBC Capital Markets, at $29.30 per share, bringing the company approximately $125 million to be used to repay debt and for general corporate purposes.

AltaGas takes over Pacific Northern Gas


Pacific Northern Gas, the main supplier of natural gas to much of northern British Columbia, has agreed to be taken over by the much bigger Calgary-based AltaGas Ltd. in a deal worth $230 million or $36.75 a share.

The deal gives AltaGas a stake in the natural gas export race, since Pacific Northern’s pipelines link Alberta and British Columbia gas fields to Kitimat, where there are at least three projects underway to export liquified natural gas to Asian markets.


Pacific Northern Gas distribution network. (PNG)

611-pnglogo-thumb-100x40-610.gifIn a news release, Pacific Northern Gas said that company executives began considering the future after PNG sold their interest in Pacific Trails Pipeline last February to the partners in the Kitimat LNG project.

Roy Dyce, president and CEO of PNG said in the news release:

This transaction is in the
best interests of our shareholders, customers, employees and other
stakeholders. Among the reasons we recommend the proposed transaction to
our shareholders are the size of the premium, the immediate liquidity
and the certainly of value the cash consideration  offers, and the fact
that we believe AltaGas’ offer fairly values the $20 million contingent
payment that PNG will receive if the Kitimat liquefied natural gas
project proceeds.

Pacific Northern already had a small partnership with AltaGas to build a gas pipeline from a Montney gas plant to
British Columbia.

612-logo__altagas_blue_145.jpgIn its news release, AltaGas said “We are pleased to welcome all PNG employees to our team. AltaGas has a
long history of operating natural gas utilities across Canada and we
will continue to deliver safe and reliable service to our customers.”

AltaGas says the transaction will result in a 50 per cent increase in AltaGas’ holdings of  regulated natural gas to consumers and businesses, now worth  over $500 million and increase customers from 75,000 to more than 110,000.

The company is looking to increased natural gas exploration taking place in areas northeastern BC in  the Montney and Horn River gas fields. AltaGas also expects to profit from “increased industrial activity in northern BC are expected to result in rate base and customer growth as areas such as Dawson Creek and Fort St. John.”

The new company would align the PNG system with AltaGas assets such as the Bear Mountain Wind Park and the Younger facility, BC’s only natural gas liquids extraction plant.

AltaGas adds.  “Growing North American natural gas supply and continued attractive natural gas prices in Asian markets continue to support growth of an LNG industry in western Canada. PNG’s Western system is well positioned to capitalize on the growing demand for additional pipeline capacity along the Summit Lake to Kitimat/Prince Rupert corridor.”

AltaGas assets include small utilities, a gas business, and  power.  AltaGas describes itself this way:

AltaGas is an energy infrastructure business with a focus on natural
gas, power and regulated utilities. With the physical and economic links
along the energy value chain together with its efficient, reliable and
profitable assets, market knowledge and financial discipline, AltaGas
has provided strong, stable and predictable returns to its investors.
AltaGas focuses on maximizing the profitability of its assets, providing
services that are complementary to its existing businesses, and
growing through the acquisition and development of energy

Consumers in northern British Columbia will be wondering, despite any long term spinoffs from liquified natural gas projects, what the deal will mean for their natural gas bills. Despite the statement by Dyce, “We look forward to joining with AltaGas in continuing our mutual history of delivering safe, reliable service to our customers” and Cornhill’s similar statement, “AltaGas has a long history of operating natural gas utilities across Canada and we will continue to deliver safe and reliable service to our customers,” it is highly likely that consumers in BC will be skeptical of the deal because up until now, while the price of natural gas has been falling, Pacific Northern Gas continued to charge very high (some would say extortionate) transportation and other fees to consumers.