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OEB Revokes Designation of Gas Storage Areas Proposed for Compressed Air Storage

Overview

On April 9, 2020, the Ontario Energy Board revoked the designation of designated natural gas storage areas known as the Bayfield Pool and the Stanley 4-7-XI Pool in the County of Huron, Ontario. These Pools had been designated as gas storage areas by the OEB in 2012. Designation is intended to protect geological formations for use as gas storage areas. Under the Ontario Energy Board Act, 1998, every application for a licence relating to a well in a designated gas storage area must be referred to the OEB.

In its decision, the OEB accepted that the Pools are uneconomic to develop as gas storage areas. Since the time of designation of the Pools, gas prices have decreased. The OEB noted the evidence of the applicant regarding low gas price spreads that are an ongoing barrier to development of the Pools and, further, regarding the considerable distance of the Pools from, and cost to connect them to, the Dawn-Trafalgar gas transmission system. The OEB accepted that it is very unlikely that the Pools will be developed as gas storage areas in the foreseeable future.

The applicant’s evidence was that the storage capacity of the Pools of 3.3 billion cubic feet is immaterial to Ontario’s total current natural gas storage capacity of 248 BCF. The OEB agreed that the Pools are not necessary for gas storage security in Ontario.

The applicant submitted to the OEB that it is in the public interest to develop these reservoirs for a more useful purpose as compressed air energy storage facilities. The CAES facilities would be used to store compressed air that could be released to generate electricity at higher-priced, peak demand hours. The applicant indicated that this proposed use of the Pools requires a new government regulation and that it had made a formal request to obtain a CAES regulation. The applicant requested that the revocation of the designation be made conditional upon the issuance of a new regulation, so that the appropriate status of the pools for either natural gas or compressed air storage would be preserved depending on the outcome of the request for a regulation.

The OEB noted that it has no authority over the establishment of regulations regarding CAES and it said that, inasmuch as the applicant had clearly demonstrated that the Pools are uneconomic and unnecessary as natural gas storage areas, it saw no reason to make its approval conditional upon a new regulation. The OEB unconditionally ordered that the designation of the Pools be revoked effective immediately.