Updated: Gas explosion cuts supply to industries

Pipeline rupture near Prince George idles pulp mills, stokes fears of gasoline price spikes

Transport Canada is investigating the cause of a natural gas pipeline rupture and explosion near Prince George Tuesday.

Updated October 11: The National Energy Board has given Enbridge Inc. (TSX, NYSE:ENB) approval to restart its parallel, 30-inch line. The approval came late Wednesday evening (October 10) after an integrity assessment examining signs of damage to the pipe, geotechnical and ground disturbance, and other potential issues.

British Columbians can count themselves lucky a natural gas pipeline explosion near Prince George that affected roughly one million natural gas customers yesterday didn’t kill anyone and happened in the fall, not the dead of winter.

But even a short-term interruption to B.C.’s natural gas supply has had immediate impacts, including sparking a forecast that gasoline prices will spike. 

A 36-inch diameter gas pipeline owned and operated by Enbridge ruptured and exploded on October 9 around 5:45 p.m. The day after the rupture, there were reports of refineries in B.C. and Washington state having to curtail operations, which was expected to result in a price hike at the pumps, and large industrial users like pulp mills were being told to shut down. 

Dan McTeague, an analyst for GasBuddy, predicts gasoline prices will hit $1.61 per litre at the pumps in Vancouver on Friday October 12.

“The duration of the price impact will depend on the length of time that the pipeline is out of service, but it may be at least one to two weeks,” GasBuddy reported. “Motorists are urged to only buy what fuel they need to limit the scope of the price increases.”

One million FortisBC customers – homeowners, hospitals, schools, universities, businesses and industries – use natural gas for everything from hot water and home heating to powering pulp mills and cement plants.

Roughly 70% of them are being affected by the incident, which occurred 13 kilometres north of Prince George and required the evacuation of 70 to 80 people living on the north side of the Lheidli T’enneh reserve.

No injuries were reported, and the cause of the explosion is not yet known. Inspectors from Transport Canada and the National Energy Board were dispatched to investigate the incident.

FortisBC customers have been asked to turn their heat off, to save on the gas that would have still been in the system – called line pack – which is a form of storage.

Some industry insiders speculate it could take days or even weeks to fix the ruptured pipelines.

“It depends on the damage and it also depends on whether this parallel pipe was ruptured or not,” said David Austin, a lawyer who specializes in energy for Stirling LLP.  

He referred to the fact that the pipeline that ruptured was one of two parallel lines. FortisBC confirmed October 10 that both lines were damaged.

FortisBC is now scrambling to replace the lost supply of natural gas.

“We are looking to add to our supply by bringing in gas through the TransCanada line from Alberta and activating our Tilbury and Mt. Hayes liquefied natural gas plants, and have also talked to our industrial customers about switching to alternative fuel sources,” said FortisBC spokesman Alex Munro.

In addition to the “line pack” gas still in the system, FortisBC has liquefied natural gas stored in tanks at Tilbury Island and on Vancouver Island. Washington state also has underground storage.

David Craig, executive director of the Commercial Energy Users Association, expects there will be widespread impact on residential, business and industrial customers, depending on how long it would take to fix the ruptured line.

“There will be a small amount of delay time available in the pack in the pipeline, but after that, I’m taking it, from what little I know about it, this is going to be a pretty serious shutdown and impact on residential, commercial and others in terms of the primary uses of natural gas for space heating and also for hot water,” Craig said.

“Every business, there’s a boiler in the basement that supplies hot water and heating. I would expect widespread and significant inconvenience and probably some impacts on the electrical system as people end up using stove tops to heat water.”

A number of industries reported having to shut down or cut back on their operations. The Parkland Fuel Corp. (TSX:PKI) refinery in Burnaby, for example, reported October 10 that it had curtailed operations.

Three Washington state refineries also announced they would be cutting back operations. Business in Vancouver also received reports that pulp mills were being told to shut down.

Levi Sampson, president of Harmac Pacific pulp mill in Nanaimo, said his mill was ordered to immediately stop using natural gas. The mill was able to switch from natural gas to oil, which would give it 24 hours of continued operating time.

“After that time, it becomes more complex,” Sampson said. “As of now, we’re being asked to not use natural gas in the operations.”

The Howe Sound Pulp and Paper mill in Port Mellon on the Sunshine also reported having to shut down  October 11 because of the rupture. Paper Excellence communications director Kathy Cloutier said the mill was forced to suspend operations because its lime kiln is fired by natural gas.

nbennett@biv.com

@nbennett_biv