June 28, 2023

Producers utilize natural gas as fuel from wellhead to burner tip. Well activities and gathering consume about 3.5% of production as fuel while gas plant operations consume about 2.3%. Pipelines, such as NGTL, utilize natural gas to operate compression, current fuel rate on NGTL is 1.86%.

Based on the Output Based Pricing System (OBPS) fraction of 80% for 2022, the carbon price impact on producer cost will be CDN $0.04/MMBtu. As the OBPS fractions are tightened at 2%/year, the carbon cost impact to producers grows to CDN $0.25/MMBtu in 2030.

Due to increased costs, Canadian producers will be unable to pass carbon costs onto downstream  consumers accessing US gas produced without a carbon price; AECO-NIT basis will widen.