Natural Gas Transportation Costs

Only transportation costs you incur for the delivery of notionally acquired natural gas to the LNG facility through a feedstock pipeline are allowable in determining the cost of notionally acquired natural gas (Figure 1).

Figure 1 - Allowable Transportation Costs

Figure 1 - Allowable Transportation Costs

Allowable transportation costs include costs incurred to transport natural gas at or downstream of the feedstock pipeline inlet meter to the point where the natural gas is delivered to the LNG facility inlet meter.

Where the feedstock pipeline is directly connected to the Nova Gas Transmission Ltd. (NGTL) system, the meter that is at the NGTL delivery point and that is part of the NGTL system is considered to be part of the feedstock pipeline.

Types of Natural Gas Transportation Costs

You may enter into different types of natural gas transportation arrangements. Allowable transportation costs include, but are not limited to:

Firm Service Demand Charge – This arrangement provides the shipper with a certain capacity to ship gas through the feedstock pipeline. Under this type of arrangement the shipper pays for the entire contracted capacity whether or not the capacity is used.

The entire demand charge of the firm service is an allowable transportation cost unless you recover any portion of this cost from another party. Recovered transportation costs reduce the total amount of transportation cost.

Interruptible Service Toll – This arrangement provides the shipper with capacity on a best-efforts basis. Under this type of arrangement, the shipper pays a toll only for the volume of natural gas shipped on the pipeline.

An interruptible service toll is an allowable transportation cost.

Authorized Over-run Service Charge – This charge is incurred when volumes are shipped in excess of contracted firm service capacity.

An authorized over-run service charge is an allowable transportation cost.

Delivery Charge – Certain pipelines charge shippers at the delivery meter where natural gas is removed from the pipeline at the delivery meter.

If the delivery meter is designated as the feedstock pipeline inlet meter, the delivery charge is an allowable transportation cost.

Carbon Tax and Motor Fuel Tax – Natural gas may be consumed at compressor stations along a natural gas pipeline for the purposes of transporting natural gas.  B.C. imposes carbon tax and motor fuel tax on the consumed natural gas.

Carbon tax and motor fuel tax paid in relation to natural gas used to transport natural gas along the feedstock pipeline are allowable transportation costs.

Pipeline Fuel Charge – In some instances, some of the natural gas being transported is diverted and used to run the compressors and in other cases, the pipeline operator purchases gas to run the compressors and charges the shipper for the purchased gas.

A pipeline fuel charge is an allowable transportation cost if the pipeline operator charges you for the purchased gas.

Abandonment surcharge – Some pipeline operators impose a charge on shippers to create a fund for the future abandonment of pipelines.

An abandonment surcharge is an allowable transportation cost.

Non-allowable Transportation Costs

Transportation costs that are not allowed include:

  • Costs incurred to transmit natural gas upstream of the feedstock pipeline inlet
  • Costs incurred for natural gas processing on the feedstock pipeline