Report - Agence canadienne d'évaluation environnementale

Chapter 3 Economic context of the project
In the current chapter, the Panel addresses the economic context for the project. The
project’s impact on gas prices in Quebec and Ontario is also addressed, as are
growth perspectives of these markets. The Panel also examines the spinoffs the
project on the regional level.
Natural gas prices in Quebec and Ontario
The price of natural gas paid by consumers usually comprises the cost of the basic
product 1 , transportation 2 , and distribution 3 . Though the basic cost is determined by the
market, transportation and distribution costs are regulated in both Quebec and Ontario.
Quebec is located at the eastern end of the trans-Canada natural gas transportation
network (Figure 4). For this reason, natural gas transportation costs for delivery in Quebec
are higher than in markets farther west upstream on the network such as in Manitoba.
Since 2000, natural gas price increases and volatility have had the effect of lowering
industrial demand for natural gas in favour of other fuels (NEB, 2004, p. 15 4 ). In addition,
certain industries that depend exclusively on natural gas had to transfer their activities to
places where gas price is not as high. According to the NEB, “certain [industries] had to
slow down their activities or temporarily stop activities given the high gas prices” (ibid.).
Industries often have facilities that enable them to switch from fuel oil to natural gas
and back depending on prices. However, industries in the petrochemicals sector in
Quebec are captive of natural gas, since they need it in their manufacturing process
(Canadian Association of Chemical Products Manufacturers, DM608, p. 1).
Gaz Métro recalled the negative impacts of natural gas price volatility on the market
and mentioned the loss in 2001 of the equivalent of 850 Gm 3 of natural gas sales,
which represented 15 percent of total volume distributed. Of this volume, 566 Gm 3
was dropped by Gaz Métro’s industrial customers for No. 6 fuel oil, with the
environmental consequences that result in terms of atmospheric pollution and
increased carbon dioxide emissions (DM576).
1. The price paid for natural gas at the supply or transaction centre.
2. The cost of transporting natural gas from its source to the local distribution company’s door.
3. Natural gas transportation costs in the territory of a local distribution company, including the service charges for
storage and balancing of loads.
4. [On-line: www.one.gc.ca/energy/EnergyReports/EMAGasLookingAhead2010August2004_e.pdf].
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