Energy regulator rejects FortisBC's $327M application for natural gas pipeline

The B.C. Utilities Commission (BCUC) has rejected an application from FortisBC to build a natural gas pipeline worth $327 million in the Okanagan region.

The Okanagan Capacity Upgrade (OCU) project would have seen the installation of 30 kilometres of new pipeline, running north from Penticton to Chute Lake, along with two new power stations to help regulate the pipeline's flow.

FortisBC, the main natural gas utility in the province, said the OCU project was needed to meet demand in the southern Interior over the next two decades. 

It had told the BCUC that it would be unable to meet the demand for natural gas — which is primarily used to heat homes in B.C. — as early as the winter of 2026/27 with its existing pipeline infrastructure.

However, the BCUC — the province's independent energy regulator — found that FortisBC did not account for a flattening, or even a downturn, of the demand for natural gas as the province moves away from fossil-fuel-based energy sources under its CleanBC plan.

"In conclusion, the panel finds that, if [FortisBC's] application is denied in whole or in part, the forecast peak demand growth … is highly unlikely to occur," a BCUC panel report released Friday stated.

The two-member panel found that the project was not "necessary for the public convenience and does not conserve the public interest" following an extensive consultation period which involved public feedback and the input of several stakeholders, including the Penticton Indian Band (PIB).

It stated that the province's environmental plan encourages electrification of heating infrastructure, in particular, with the plan encouraging new homes to install technologies like heat pumps instead of traditional natural gas heaters.

In a statement, FortisBC said they were reviewing the BCUC's decision.

"We are disappointed that our application to develop this important piece of infrastructure has been denied," the company said. "FortisBC's infrastructure is vital to the delivery of renewable and low-carbon gases, which are critical to the province's ability to meet its CleanBC targets."

Under provincial regulations, FortisBC can file a reconsideration application with the BCUC or take the regulator to court over a decision. The utility did not indicate in its statement if it was considering an appeal.

Proposal received nearly 100 letters

In total, the BCUC received 96 letters from the public commenting on the project.

The PIB, as well as five other stakeholders, served as interveners at the BCUC panel.

One of them, the industry group Commercial Energy Consumers Association of British Columbia, stated that FortisBC had demonstrated an "immediate need for capacity" and the push for more electrification would not significantly affect FortisBC's short-term future.

On the other hand, climate non-profit First Things First Okanagan argued that recent climate action plans from the Okanagan cities of Vernon and Penticton recognized the need to reduce natural gas use in buildings.

The intervener argued that those plans would likely lessen natural gas demand in those areas in the years to come.

While the PIB indicated it would support the project in its final submission to the panel, an earlier report commissioned by the band stated that FortisBC had not demonstrated a clear need for it. 

Ultimately, however, the PIB said its community had voted in support of FortisBC's plans.

After its consultation process, the BCUC panel said that there was no certainty that the full scope of the project was required.

It has directed Fortis to examine other short-term solutions for anticipated natural gas demand and file a mitigation plan by the end of July 2024.