The BCUC is examining whether gas utilities should continue to buy biomethane from outside the province. This could upset an important part of the government’s climate strategy.
Introduction
Natural gas provides relatively cheap building and industrial heat in BC. But burning natural gas emits greenhouse gases (GHG), something the government is keen to reduce. There are broadly two ways to reduce GHG emissions from natural gas: stop using it, or replace it with “clean” gas.
Much attention has focused on the former, with government subsidies for electric heat pumps to replace gas furnaces, and restrictions on connecting new buildings to the gas distribution network. These initiatives will, over time, reduce GHG emissions, assuming the electricity system that will substitute for gas can overcome its forecast deficits.
However, there is another way – replacing natural gas with biomethane, a clean alternative. Not only does this alleviate the need for more electricity, but it also takes advantage of the billions of dollars invested in the gas system and the thousands of people employed to support it.
But now, an inquiry launched by the BC Utilities Commission (BCUC) on whether gas utilities should be allowed to import biomethane has cast doubt on this second strategy.
Background
Conventional natural gas (chiefly methane) is trapped underground until it is extracted and burned, causing those pesky GHG emissions. If we didn’t extract it, it would stay safely unburned and underground.
Biomethane, on the other hand, is a “clean” substitute for conventional natural gas, created from organic material such as decomposing municipal and agricultural waste. This organic material would have decomposed into methane (i.e. GHG emissions) anyway; using this methane instead of the conventional type is generally considered to create no new GHG emissions, and leaves a corresponding amount of methane stored underground.
FortisBC Energy Inc. (FEI), BC’s largest natural gas distribution utility, first purchased biomethane as long ago as 2010. The biomethane, which is chemically equivalent to methane, is injected into FEI’s distribution system, displacing an equivalent amount of its GHG-emitting cousin.
Notional delivery
But there’s simply not enough biomethane created in BC to meet our demand for gas. By 2019 FEI was buying it from Ontario, and by 2021 it had extended its horizons to Iowa. Today, the majority of FEI’s biomethane comes from outside the province.
And this is where it gets a bit controversial, because the biomethane purchased from outside BC is not injected into FEI’s distribution system, but is delivered “notionally”. That is, both FEI and the seller agree that biomethane was delivered, but in fact the seller’s biomethane is injected into a different gas distribution system, and FEI takes delivery of an equivalent volume of gas that is almost certainly not biomethane.
To make sure that only FEI can claim it purchased this “clean” gas, its biomethane purchase agreements state that FEI is acquiring all the “environmental attributes” along with the gas. No one else, including anyone who uses the actual biomethane FEI has purchased, can claim they are using “clean” gas.
Notional delivery is used because it would be highly uneconomic for utilities to ship the biomethane across the continent and inject it into their BC distribution systems. And in any case, once in the distribution system it is blended with conventional natural gas, so what’s delivered to biomethane customers is highly unlikely to be 100 percent biomethane anyway. The entire system relies on everyone keeping records of the amounts of biomethane bought and sold, so that the end customers can get the credit for the clean gas they have bought, and there is no double counting of credits.
I’m from the government and I’m here to help
The BC government has been supportive of biomethane for years. CleanBC has promoted the use of “renewable natural gas” since its first plan was issued in 2018, which also features in its subsequent Roadmap to 2030 and the Ministry of Energy’s 2024 Energy Strategy.
And in 2017, the government added the acquisition of “renewable natural gas” to its list of prescribed undertakings under the Clean Energy Act, meaning that the BCUC can’t prevent utilities from buying it and passing the cost on to their customers. The practical effect of this is that gas utilities are willing to buy biomethane, which is much more expensive than conventional natural gas, at no financial risk to themselves.
However, the government didn’t define the term “renewable natural gas.” It was generally thought to refer to biomethane, but no one was really certain. And when the government referred to acquiring renewable natural gas, what did that mean? Was notional delivery OK?
The BCUC had approved all FEI’s agreements to purchase biomethane within Canada. But after approving FEI’s first purchase of biomethane from outside the country, the BCUC recommended an inquiry into the “broader public interest issues” involved, including the definition of “renewable natural gas” and the validity of notional delivery.
The first inquiry
The BCUC’s inquiry report was issued in July 2022. Rather than provide a comprehensive definition of renewable natural gas, it gave examples of certain activities that would qualify as the acquisition of renewable natural gas under the Clean Energy Act, and left open the possibility that there may be others in future.
In summary, these examples are when a public utility:
- Buys biomethane that is injected into ITS OWN distribution system.
- Buys biomethane that is NOT injected into its own distribution system, but instead takes physical delivery of other gas and acquires the contractual rights to the environmental attributes of the biomethane.
- Buys conventional natural gas and SEPARATELY buys the environmental attributes associated with the production of some biomethane.
It’s important to remember that this definition is a legal opinion, not a scientific “fact.” The BCUC defined examples of renewable natural gas to be used when interpreting the Clean Energy Act, and for no other purpose. For this reason, it is something that can also be changed, either by the BCUC or the government.
stand.earth complaint
Recently the BCUC received a complaint from stand.earth, an environmental group, alleging that the BCUC’s definition of renewable natural gas was allowing FEI to purchase the gas in a way that is “not contributing to actual greenhouse gas (GHG) reductions in British Columbia.”
In response, the BCUC initiated an inquiry into its current definition of renewable natural gas, and whether acquisitions of biomethane outside BC are consistent with the government’s intent. The inquiry will also consider the risk of double counting the environmental attributes associated with biomethane purchased from other jurisdictions.
This inquiry is a serious matter – if gas utilities are no longer able to buy biomethane from outside BC, we will be in a bit of a fix.
Future risks
For one thing, the government will be even less likely to meet its climate targets. FEI projects that its supply of biomethane will reach 33 terajoules (TJ) per day this year, which is 7.6 percent of its total forecast demand of 436 TJ per day, but is only half way to the 15 percent “minimum requirement” by 2030 set out in the CleanBC plan.
Worse still, the CleanBC Roadmap calls for a mandated emissions cap for gas utilities as part of its plan to achieve the government’s 2030 climate target (something I’ve already said should be scrapped). The 2030 cap would be set at approximately 47 percent below 2007 levels, which FEI thinks could require displacing around half its natural gas with renewable natural gas (or, presumably, halving the amount of gas it delivers).
It is unlikely that meaningful amounts of new biomethane will be available in BC. If gas utilities are not able to import it, notionally at least, there are really only two choices: relaxing the 2030 climate target, or accelerating the switch from natural gas to electricity.
The latter is not going to happen. At its peak, natural gas delivers twice as much energy as the electrical system in BC. To halve gas demand would mean roughly doubling the capacity of BC Hydro’s system, and replacing the heating systems of half the province’s buildings with heat pumps. To do that by 2050 would be challenging, to say the least – to think it could be done by 2030 is delusional.
Conclusion
It’s unlikely, then, that the BCUC will change its position on renewable natural gas. After all, the government has given clear signals that it is fine with the status quo. In the BCUC’s earlier inquiry, the Ministry of Energy made a submission in which it raised no objections to notional delivery of biomethane or to acquisitions from outside BC, although it noted the risk of “double-counting” GHG emission reductions in different jurisdictions.
Also, the government last amended the terms of the prescribed undertaking as recently as June 2024. It was well aware that FEI was purchasing biomethane from outside BC, and if it had wanted to prevent that it could easily have done so. It did not.
The BCUC’s decision is expected after the end of November, roughly the same time as the review of CleanBC that was announced in May. This raises the interesting possibility of a coordinated “reset” of the province’s climate plans – both the GHG emission reduction targets and some of the approaches to meeting them.
It would be nice to see some joined-up thinking coming out of all of this.
A final thought
If the BCUC really wanted to understand how clean BC’s energy supply is today, perhaps it should also examine the electricity we use.
Last year, BC Hydro imported $1.4 billion of electricity as a result of the multi-year drought in the province. We don’t know where this energy came from, or how clean it was, but in 2024 the Southwest Power Pool, a key provider of market electricity in the western region, generated 25 percent of its electricity from coal, and 35 percent from gas.
Perhaps the topic for another BCUC inquiry?