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Project seeks provincial cash to truck natural gas to Wawa

Queen's Park, Ontario Energy Board yet to approve, show support for natural gas delivery by truck to energy price-gouged towns

A plan to deliver natural gas by truck to communities on the north shore of Lake Superior has had its share of twists and turns over the last five years.

With a new gas supplier in place and a repackaged proposal now before the Ontario Energy Board, the communities of Terrace Bay, Schreiber, Marathon, Manitouwadge and Wawa are taking another crack at dipping into a provincial fund to finally bring an alternative fuel to their towns.

Under the banner of Lakeshore Natural Gas, the communities' proposed $55-million North Shore Gas Project aims to create a pipeline on wheels by trucking compressed natural gas (CNG) from a facility at Red Rock to community depots for local distribution to an estimated 13,000 customers.  

Calgary-based Certarus signed on as their supplier of choice in April.

Waiting for the phone to ring from the province is Daryl Skworchinski, president of Lakeshore Natural Gas, a new five-community utility company, who calls this unique project "scalable" and "transformational" for towns in the region. They're looking for government funding support and the regulatory green light to begin construction planning and procurement. 

"We're positive the province is going to look on this as a very pragmatic solution for energy," he said. 

"There are a number of municipalities and First Nation communities that are never going to be pipeline communities. We think we have a solution that can be replicated."

The terrain along Lake Superior's north shore is too rugged, too hilly and too expensive to construct a natural gas pipeline. It's left homeowners and area businesses at the mercy of dealing with the wild price fluctuations that come with heating oil, propane and grid power.

"If you live in a community with natural gas, you don't really think about what you pay for it because it is so cost-competitive," said Skworchinski. "If you're paying hydro costs, fuel oil or propane costs in our communities, it's not uncommon to see a bill in the $3,000 to $4,000 range for a cold winter."

Skworchinski, who's also the Town of Marathon's CAO, is one of the visionaries behind this project, which would be the first of its kind in Ontario.

If everything falls right, the project could be rolled out across the region over a three-year period, starting in 2022.

The north shore of Lake Superior is booming with mineral exploration activity, mine expansions and development.

Ten kilometres north of downtown Marathon, Generation Mining is looking to build an open-pit gold mine. Like many of his nearby municipal colleagues, Skworchinkski is trying to put the community infrastructure pieces in place to attract families and new businesses to town.

Since first tabling this mobile gas delivery concept in 2016, there has been plenty of delay, disappointment and frustration with foot-dragging at Queen's Park to finally get moving on different iterations of a government funding program to extend natural gas to unserviced rural and northern regions.

Northeast Midstream, the communities' original private sector partner, is now out of the picture. 

The Concord, Ont. energy developer had plans on paper to construct a liquefied natural gas (LNG) plant, north of the town of Nipigon, designed to super-cool the gas into a liquid form for safe transport.

In the fall of 2019, provincial politicians thought it was a solid enough proposal to commit up to $30 milliion to build the facility, including $3.4 million for the front-end engineering costs.

Then the Ontario Energy Board (OEB) stepped in.

When the communities filed their phase one application before the energy regulator in late 2019, the OEB insisted they go through a competitive bid process to obtain a natural gas supply.

"We did that," said Skworchinski.

The bid from Certarus was deemed to be of higher quality and, ultimately, outscored the other proposals received, including from Northeast Midstream. 

One advantage is Certarus already has a presence on the north shore with a CNG terminal near the town of Red Rock, just east of Thunder Bay.

Certarus pulls natural gas from a nearby pipeline and compresses it into tube trailers for safe and efficient transport to a mine or mill where it's decompressed for use in heating underground mines or power generation.

Certarus first arrived in Northern Ontario in 2018, setting up a distribution hub outside Timmins to service industrial customers in the northeast. The Red Rock facility began operations last summer to service industrial customers in the northwest.

North America-wide, the company offers the same solution to remote, off-grid communities by delivering gas for use in powering local generators.

Negotiations with Certarus on a gas supply agreement with the communities began in early 2020. The deal was finally announced last month.

Skworchinski said the agreement took some time to negotiate since it's the company's first foray into the residential market in Ontario.

With Lakeshore's phase two application filed with the OEB (which is the official ask for permission to start construction), Skworchinski said they're ready to proceed once the approvals and project funding are secured.

Competition for provincial energy dollars looks fierce.

According to an October 2020 OEB report, the North Shore Gas Distribution Project is applying for $38 million from the $130-million Natural Gas Expansion Program. They're lumped in among 210 other Ontario projects in the queue, asking for a collective total of $2.6 billion.

Skworchinski said the municipalities in the Lakeshore group are prepared to invest to install gas lines to people's homes and buildings, but the financial picture will become clearer once the province indicates what it's willing to contribute.

If unsuccessful, Skworchinski said they'll go the commercial lenders route.

"It doesn't kill the project, it means we have to take a different direction. We've been waiting quite patiently for that (OEB) announcement and we're hopeful."

Switching from LNG to CNG is no big deal, Skworchinski said. The project fundamentals stay the same, just the type of delivery truck looks different.

Should they get approval this year, he feels within six months they can start planning and procurement activities in anticipation of rolling out the community hookups between 2022 and 2024.

As to what became of the plans to build Northeast Midstream's LNG plant near Nipigon, Joshua Samuel, Northeast Midstream CEO, did not respond to a query from Northern Ontario Business.

Skworchinski said he doesn't know where the Nipigon project stands and has had no contact with the company since notifying them that their bid wasn't successful.

As for the government's previous commitment of $30 million for the Nipigion LNG facility and whether that funding can be reallocated into Lakeshore's new CNG proposal, an information request by Northern Ontario Business to the Ontario Energy Board and the Ministry of Energy, Northern Development and Mines was punted over to the Ministry of Infrastructure, which offered this emailed reply: "Nipigon LNG Corporation was approved for funding under the previous Natural Gas Grant Program. No new projects are being funded under that program."