Natural gas, when used properly, is a safe and convenient energy source. The natural gas industry is highly regulated to ensure the safe design, construction, operation and maintenance of natural gas pipelines and distribution systems.

An important safety feature for residential and commercial natural gas is the addition of an odorant so people can detect it by smell.

Natural gas is neither poisonous nor harmful if inhaled for short periods; because it is lighter than air, it also quickly disperses if it leaks in an open space. However, natural gas is highly flammable. If mixed with air in small concentrations (approximately 5-15 per cent), it ignites easily; if there is a build-up of gas in an enclosed space, an explosion can occur.

Gas lines can leak or rupture if construction, posthole digging or other activity cuts these lines. As such, it is important that these facilities be located before doing any activity that creates a ground disturbance. Most utilities are members of Alberta One Call, a company that co-ordinates location activities of buried facilities. Those involved in ground excavation should call Alberta One Call (1-800-242-3447) and ask that a 'locate' be performed in the area of the proposed excavation. This service is free of change to callers.

Does use of natural gas affect the environment?

Natural gas is the cleanest-burning fossil fuel; complete combustion produces mainly water vapour and carbon dioxide. The amount of greenhouse gas released from natural gas is significantly lower than emissions from wood, coal and oil. When natural gas replaces these other fuels, emissions of greenhouse gases are reduced as much as 50 per cent.

The methane in natural gas is itself a greenhouse gas and is more potent, per tonne, than carbon dioxide; however, the actual methane releases in the natural gas industry are small, less than one per cent of all the methane handled by the industry. About 80 per cent of the greenhouse gas emissions from the use of natural gas occur at the final destination, the 'burner tip.'

Does production of natural gas affect the environment?

Exploration activities, processing facilities and pipelines can have significant effects on the environment in areas where natural gas is produced. The largest impact results from processing gas to render the raw gas acceptable for pipeline transportation to markets. Processing removes carbon dioxide, hydrogen sulphide, natural gas liquids and water vapour. On average, processing plants in Canada recover about 98 per cent of the sulphur compounds in raw gas, but the remaining amount is released into the atmosphere as sulphur dioxide. Processing facilities use energy and may also release volatile organic compounds (VOCs). Other concerns arising from natural gas production include sour gas odours, groundwater contamination, waste management, land use, and wildlife habitat in producing areas.

Who regulates the natural gas industry?

The Alberta Energy and Utilities Board (EUB) regulates exploration, production, processing, transmission and distribution of natural gas within the province. The federal National Energy Board (NEB) regulates interprovincial trade in natural gas, approves transportation charges for interprovincial transportation and issues long-term licences and short-term orders (up to 24 months) authorizing exports.

What is the role of the EUB in setting natural gas rates?

The Energy and Utilities Board (EUB) regulates investor-owned natural gas utilities in Alberta, ensuring that the rates consumers pay are just and reasonable and that the service provided is safe and adequate. The EUB is also required to regulate these utilities in ways that allow them to earn sufficient revenues to recover their costs, which includes a fair return on their investments. Therefore, in setting rates the EUB must balance the needs of consumers, along with the needs of utility companies. Rates charged by utilities are designed to recover the costs of distributing natural gas to consumers. With respect to sales customers, rates must also allow utilities to recover the costs of the natural gas itself – the costs on the free market for this gas supply that utilities must purchase. A utility company must apply to the EUB on a regular basis for approval of its distribution rates. Distribution costs are approved either through General Rate Applications, a thorough review which involves many financial aspects of the company, or through a negotiated settlement process. Gas supply costs are dealt with as a separate component but are also approved by the EUB. The price that consumers pay for this gas supply portion of their bill is called the Gas Cost Recovery Rate or GCRR. Utilities are not allowed to make a profit on the supply cost of gas. It is a flow-through cost that is passed on to consumers.

What are the current natural gas rates for EUB-regulated utilities?

Direct Energy Regulated Services North and South, and AltaGas Utilities Inc. are investor-owned and therefore subject to EUB rate regulation. There is one other smaller investor-owned utility that the EUB regulates – Orr Mineral Developments Ltd. The Board does not set rates for municipally owned gas utilities, rural gas co-ops, or natural gas competitive retailers. Recent Gas Cost Recovery Rates for residential services of the three major natural gas utilities regulated by the EUB can be found on the Utilities Consumer Adocate  website.  The site also offers information on how consumers can shop wisely when choosing electrical or natural gas suppliers.

In addition to the above rates, your bill also includes GST and a franchise tax component, which varies depending on the municipality in which you reside.

Gas bills in Alberta now include: a fixed charge, base energy charge, franchise fee, Gas Cost Recovery Rate (GCRR), and a production and storage rate rider is now being shown separately on your bill. Both the fixed charge and the base energy charge are designed to recover the costs related to the delivery of natural gas to your home.

The fixed charge recovers those costs that do not vary with consumption of gas. These include such items as the design, installation, and financing of pipelines and meters, and customer billing costs.

The base energy charge recovers the utility's costs that vary depending upon the consumption of natural gas. These are principally related to capital and operating costs, including labour, materials, supplies, and other capital-related costs. The franchise tax is designed to recover the fee paid by the utility to the municipality in which you reside, in place of the utility paying property tax.

The Production Rate Rider and Storage Rate Rider are not new credits/charges to customers. The benefit of having company-owned production and storage has historically been passed along to customers through the cost of gas. This amount is now shown separately on your bill.  The Production Rate Rider will credit customers with their share of the difference between the monthly gas rate at the market price and the lower cost natural gas supply from producing properties in the North (Beaver Hills - Fort Saskatchewan) and South (Carbon). 

The Storage Rate Rider is determined from the storage and withdrawal of gas from the Carbon facility.  When winter prices are higher than summer prices, there will be a storage credit.  Higher summer prices than winter prices will result in the rate rider being a debit.

The GCRR is the component of customer rates that is designed to recover the price the utility company pays to purchase natural gas. As noted earlier, utilities are not allowed to make a profit on the supply cost of gas. It is a flow-through cost that is passed on to consumers.

When choosing to enter a contract for gas, you should:

Competitive retailers in Alberta are licensed under the Fair Trading Act, which requires them to be licensed, post a $250,000 bond, and follow a code of conduct. If you sign an agreement for gas supply to your home, you have a 10-day 'cooling-off' period during which you can cancel the contract. If you have questions you can contact Alberta Government Services , Consumer Services division, toll free at 1-877-427-4088. 

What is the Natural Gas Price Protection Act?

The Government of Alberta is committed to assisting Albertans when natural gas prices are higher than anticipated. The Natural Gas Price Protection Act, which became effective July 1, 2001, establishes a process for providing a natural gas rebate if the Alberta reference price (a forecast of the fiscal year's average price) rises above a Prescribed Price, currently $5.50 per gigajoule. If the market price of natural gas exceeds the prescribed price, the Minister of Energy may recommend to Cabinet to authorize a rebate and the appropriate amount. Rebates automatically terminate if the Alberta Price falls below the Prescribed Price.

Future rebates will apply to most Alberta consumers, such as homeowners, landlords, condominium associations, businesses, non-profit agencies, schools, churches, health facilities, and municipal buildings.  Propane and home heating fuel users will also be eligible.

Copies of the Natural Gas Price Protection Act and regulations are available through the Queen's Printer. The Queen's Printer can be reached via email at qp@gov.ab.ca or by calling:

(780) 452-0668 (to dial toll-free from anywhere in Alberta, dial 310-0000, then the telephone number).

They may also be obtained at the Queen's Printer web site .

What is sour gas?

Sour gas is a naturally occurring gas containing more than one per cent hydrogen sulphide (H2S), typically identifiable by a strong 'rotten eggs' smell. It is commonly found in deep, hot, high-pressure natural gas deposits such as those in the foothills of Alberta's Rocky Mountains region.

What is sour gas used for?

About 98 per cent of the sulphur in Western Canada sour gas is recovered and converted into elemental sulphur, which is used in the manufacture of fertilizers, paper, pharmaceuticals, steel and other products. Canada is one of the world's leading producers of sulphur and a global leader in the technologies for safely handling and exploiting the resource.

Sour gas makes up about one-third of the gas produced in Alberta; the province also accounts for nearly 85 per cent of Canada's sour gas production. B.C.'s natural gas industry contributes most of the rest of Canada's sour gas. Sour gas is processed at more than 200 plants in Alberta, including approximately 52 larger facilities that produce elemental sulphur.

Is sour gas an issue?

An increasing number of residents in areas adjacent to sour oil or gas producing or processing operations are actively opposing sour gas development because of the perceived risks to human health and safety.

What are the risks of sour gas?

H2S is toxic to humans and animals at very low concentrations. It is deadly to humans in concentrations of 0.05 per cent to 0.1 per cent – 500 to 1000 parts per million parts (ppm) of air – or higher. Most people can smell the distinctive 'rotten eggs' odour of the gas at concentrations considerably less than one ppm.

At concentrations of 20 ppm or more, people may begin to experience slight discomfort in the eyes and nasal passages, and workers are required to wear breathing apparatus. At higher levels, around 100 ppm, the gas becomes more dangerous because it quickly numbs the sense of smell. Health effects such as dizziness and slight respiratory difficulties begin with exposure for an hour at 150 ppm, and fatalities can result from exposure to levels above 750 ppm unless the person is immediately evacuated and resuscitated.

Who regulates sour gas?

Primary responsibility for the integrity and safety of sour gas operations falls to the Alberta Energy and Utilities Board (EUB), which has stringent regulations for sour oil and gas producing, processing and transportation.

What's being done about sour gas?

The petroleum industry is developing and revising safety standards and training programs to protect workers and the public, and is working with regulatory agencies to review and upgrade operating and safety guidelines for sour gas operations. Industry is also on record as supporting strong regulatory enforcement actions where sour gas operations present a risk to public safety or the environment. Government regulations and industry initiatives have established high standards for sour gas wells, pipelines and processing facilities in western Canada. Design, equipment, training and inspection ensure the integrity of production facilities.