Canadian Propane Industry Faces Challenges and Opportunities

Interest groups across Canada continue pressure to invest taxpayers’ money into expansion of natural gas infrastructure

While the Canadian propane industry ponders the impacts of the U.S. election and how relationships with its biggest trading partner will change, the Canadian Propane Association continues to work on a range of issues that bring both challenges and opportunities for the industry, writes Peter Maddox, Ontario regional manager and marketing director of the Canadian Propane Association.

Interest groups across Canada continue to pressure governments to invest taxpayers’ money into the expansion of natural gas infrastructure. And many politicians view natural gas expansion as a guaranteed vote winner. The Canadian propane industry has been working hard to change some of these perceptions and to ensure there is a level playing field in the energy market.

In several provinces, the Canadian Propane Association has used a mixture of regulatory challenges and advocacy to limit the success of expansion proposals. In Ontario, the CPA and some of its member companies appeared as intervenors before the Ontario Energy Board, successfully arguing that gas utilities cannot cross-subsidize expansion from existing ratepayers. This victory appears to have largely limited the possibility on non-economically viable expansion projects being proposed or approved.

However, in late January, the Ontario government announced a C$100m grant fund to support natural gas expansion. While, to some degree this was a repackaging of existing infrastructure funding, it signals the government’s determination to keep pushing a natural gas agenda, to the detriment of jobs and investment by other energy industry segments.

In Canada, the existence of carbon pricing programs is now a reality. These programs are typically provincially mandated—and whether a carbon tax or cap and trade system—their goal is to put a price on carbon to push consumers to reduce greenhouse gas emissions.

Carbon pricing programs increase the cost of fossil fuels and may encourage consumers to move towards electrification and renewables. It is not all bad news for the propane industry though—propane’s relatively low greenhouse gas emissions give it a lower tax rate than competing fuels such as gasoline, diesel and fuel oil.

This price and emissions advantage is helping the propane industry to push for government assistance in two key areas:

• Auto Propane – Incremental growth in the use of propane as an automotive fuel should get a significant boost as governments realize the important role propane can play in reducing costs and lowering emissions. The CPA is advocating for vehicle conversion rebates and tax breaks, and the inclusion of propane in alternative fuel policy.
• Home Energy Upgrades – A series of programs have been implemented, or are being planned, to assist homeowners to improve energy efficiency in their homes. These programs include funding tools for customers to upgrade to high-efficiency propane furnaces from older appliances and fuels such as oil and wood.

Calgary-based AltaGas Ltd. will build the first propane export terminal on Canada’s west coast after receiving regulatory approval, with the goal of exporting propane by early 2019. AltaGas already has agreements with Asian buyers, with shipments expected to take less time to get to market than those from the Gulf Coast.

The project is expected to create 200 to 250 construction jobs and about 40 to 50 permanent jobs once operational. This is an important development for the Canadian industry, as it endeavors to broaden its customer base.