North of Superior, towns look to hit the gas—even if it’s trucked in

By John Michael McGrath - Published on March 10, 2016
The province's natural gas network is too far away for some communities in Ontario, forcing them to use more expensive electricity or propane.



Winters are hard enough on the northern shore of Lake Superior, but when the only option is to heat homes with electricity, the cold weather hits people right in the wallet, too.

That’s why a group of towns in the province’s northwest are hoping to build a natural gas network. But to do it, they’ll have to rely on something relatively new in Ontario—liquefied natural gas, or LNG.

“It’s cold here in the winter. People use a lot of heat,” says Jody Davis, mayor of Terrace Bay. “Last year, for a 1,200-square-foot house, your heating bill in the winter could be $1,000 a month.”

The problem for places such as Schreiber, Terrace Bay, Marathon, Wawa and Manitouwadge is that Ontario’s natural gas network is too far away—a problem they share with rural regions across the province.

According to the Ontario Federation of Agriculture, 40,000 farms and approximately 650,000 households in the province don’t have natural gas access. The federation estimates that switching to natural gas from conventional heating sources such as electricity or propane could save a dairy farm at least $10,000 per year. Poultry and pork operations could save even more.

Extending the gas pipelines is one option but that’s costly over longer distances. For north shore communities, the gas network is more than 100 kilometres to the north.  But there is an alternative: chill the natural gas to about -160 C so it becomes a liquid, pump it into insulated trucks, and deliver it from the pipeline to town at (hopefully) a lower cost. At the town end, the liquefied natural gas is heated back into a gaseous state and pumped via a local pipe network directly to customers, as in other big cities in Ontario.

“The model is a ‘virtual pipeline’,” says Joshua Samuel, CEO of Northeast Midstream, the company proposing to serve the north shore towns. “It exists elsewhere; it’s just new to Ontario.”

Terrace Bay and the other communities have signed franchise agreements with Toronto-based Northeast Midstream, which would build a new gas facility in the north and guarantee the supply of natural gas.

Davis says Terrace Bay residents aren’t just interested in home heating costs: they hope the cheaper costs of natural gas will have substantial economic development benefits and lower the costs of locating energy-intensive industries nearby.

Neither the municipalities nor Northeast Midstream have completed a feasibility study yet. And there’s a wrinkle that could change the economics of building pipelines: the province has asked the Ontario Energy Board to adopt new regulations that would make it affordable for some communities to be connected to the existing gas network, but says that won’t work for every community.

The Liberals also announced a $200 million program in this year’s provincial budget to extend government loans to help subsidize the expansion of natural gas access to rural areas, and a further $30 million in grants.

The energy board expects to hold its first hearings on expanding natural gas access in April. Until the government implements new regulations for remote natural gas access, proposals to serve places such as Terrace Bay and elsewhere are in a holding pattern, as companies wait and see whether they’ll be allowed to charge profitable rates.

For communities where pipeline costs will remain prohibitive, liquefied natural gas promises to bring people’s home heating bills way down. The cost of natural gas is as low as it’s been in nearly a generation thanks to the massive growth of hydraulic fracturing, or fracking, in the United States.

“We could save anywhere from 40 to 50 per cent of our heating costs with LNG,” Davis says. That’s despite the fact that costs in Terrace Bay will inevitably be higher than a natural gas customer would pay in Toronto or another big city with easy access to pipelines.

More broadly, the natural gas industry would like to find more customers  before the glut on the market forces it to start giving the stuff away for free. Liquefied gas means reaching potential new customers via ships on the Great Lakes and trucks on Highway 401. It could also bring cheap heat and power to remote mining settlements.

A big expansion of natural gas use raises many environmental questions. Natural gas burns cleaner than oil or coal, but additional energy is needed to chill and move liquid natural gas. Samuel says Northeast Midstream’s facility will run on electricity, meaning additional carbon emissions will be modest.

“When you look at the actual GHG [greenhouse gas] emissions from our facility, we aren’t actually generating any directly,” Samuel says. “Indirectly, it’s just the carbon intensity of the [electricity] grid.”

For now, towns in the north and across Ontario will have to wait for the government’s process to grant them access to the kind of cheaper energy that cities take for granted.

“We look forward to it. We’re just looking to be treated more equally,” Davis says.

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