There is little Canadian interest in the Rover (or Nexus) gas pipeline

Frank Zaski posted this to FERC this morning. Many of the same arguments can be used against Nexus – even more potent ones – such as over half of Nexus capacity is destined for Canada, costs are higher (see below), they are only 55% to 66% subscribed and an anchor shipper (Chesapeake) is almost bankrupt, Energy Transfer is already subsidizing them. 

http://elibrary.ferc.gov/idmws/file_list.asp?accession_num=20160330-5004

There is little Canadian interest in the Rover gas pipeline.

CANADA is a major destination for Rover. It appears virtually all the gas they plan to ship thru Michigan and the Market Segment is destined for Canada and Dawn. However, there does not appear to be much Canadian interest in Rover gas primarily because its delivered COST will be higher and many fear the strong potential for stranded costs being passed on to ratepayers.

ROVER GAS WILL COST CANADIANS MORE THAN GAS FROM OTHER SOURCES

In the most recent Ontario Energy Board (OEB) Natural Gas Market Review (February 2016), a number of Ontario organizations voiced their concerned with Rover (and Nexus) plans to ship gas to Dawn.

TransCanada stated:

Transportation paths from Marcellus/Utica via the Niagara, Chippawa and Waddington, New York interconnect points are more cost effective for Ontario consumers than Rover/Dawn.

The landed cost of gas into the Enbridge EDA (Toronto) would be lower from Niagara ($4.90 $CAD/GJ) and Waddington ($5.30) than from Vector ($5.55), Rover ($5.73) or Nexus ($5.82).

Firm contracts for gas supply from New York to Ontario through Niagara and Chippawa will rise to nearly 1.1 Bcf/d in the winter of 2016/17. TransCanada expects to be able to service this reversal of flow for only $30 million.

The flow reversal is proceeding with Waddington (NY) shipments to Ontario expected in November of 2017. This reversal of flow will also be at low cost.

Western Canadian (WCSB) gas will continue to flow to Ontario thru the TransCanada Mainline, Great Lakes Gas Transmission and Alliance pipeline systems.

http://www.rds.ontarioenergyboard.ca/webdrawer/webdrawer.dll/webdrawer/rec/516178/view/

As in the US, Canadian gas supplies are at very high levels and prices very low.

CANADIAN BUSINESS ASSOCIATIONS representing industrial gas users, property owners, power producers and manufactures write in Canadian OEB filings that they basically DON’T WANT ROVER GAS:

Associations are concerned that the Dawn Parkway Expansion Application revenues at current rates did not support the investment and that SIGNIFICANT GAS RATE INCREASES will result.

Associations want to avoid “burdening pipeline builds” for the 40 – 50 year life of a pipeline and the potential to pay for stranded assets. They recommend lower cost NY pipeline alternatives, market based, non-facility solutions (such as displacement) and investing in technology to cut gas usage and GHG. 

The associations firmly believe Canadian regulators will act to reduce GHG and natural gas consumption. “Ontario is likely at or very close to peak gas consumption.” (In Canada, natural gas is seen as a contributor to GHG gas emissions and not as a solution - as in the US.)

http://www.ontarioenergyboard.ca/oeb/Industry/Regulatory%20Proceedings/Policy%20Initiatives%20and%20Consultations/2015%20Natural%20Gas%20Market%20Review%20%28EB-2015-0237%29

HOW MUCH GAS DOES ROVER REALLY PLAN TO SHIP TO CANADA (and Michigan)?

Rover claims they are FULLY SUBSCIBED to ship 1.3 Bcfd to Dawn thru Vector. However, Vector’s capacity is only 1.3 Bcfd and Nexus also plans to ship (.76 Bcfd) thru Vector as well. How can these companies ship over 2.0 Bcfd thru a 1.3 Bcfd capacity pipeline?

The stated capacity of Rover’s Market Segment pipeline north of Defiance is 1.3Bcfd. If all of this gas is destined for Canada, then apparently no gas is planned for Michigan customers. No real Michigan customers were identified in FERC filing, and Michigan’s Consumers Energy (CMS) stated that Rover did not meet their requirements.

It appears Rover is not fully subscribed and has contracted for only .9 Bcfd capacity on Vector. https://www.snl.com/SNLWebPlatform/Content/Industry/IOC/PipelineContractDetails.aspx?KeyInstn=4079497

Canada does not need this much extra gas – it is far more gas than what currently flows to Canada thru Michigan and New York today.  

FLAT ELECTRIC DEMAND: The Ontario grid operator sees flat 18-month electric demand thru 2017.  950 MW of wind and 140 MW of solar capacity will be added during this period. https://www.snl.com/InteractiveX/article.aspx?ID=35876685&KPLT=4

Quebec already gets 99% of its electricity from renewable sources (mostly hydro). 

Except for a 100% ethane plant in Sarnia, no new petrochemical plants are planned for Eastern Canada.

There is little potential to ship Rover gas to the US and Canadian East  Coasts or for LNG export. US East Coast pipelines are destined to supply those US states, and for the few US and Canadian LNG export plants possible, they already have designated East Coast pipelines. No LNG plant north of Maryland has received financial approval.

Summary

Rover cannot claim new sources or new markets. Considerable Marcellus and Utica gas is already flowing to Eastern Canada thru Michigan and especially the economical way thru New York. These existing pipelines provide gas at lower cost, thru multiple locations and without Rover’s environmental degradation.

Building Rover will negatively impact, if not destroy, over 9,000 acres of US forests, farmland, wetlands and other property. This is in addition to intimidating thousands of property owners.

Rover’s environmental degradation far outweighs any benefits to Canada or Michigan.