Industry Leader: The Federation of Alberta Gas Co-ops Ltd.

In the early 1960s, Alberta farmers were clamoring for a lower cost energy option. Natural gas was arriving in waves at Alberta’s cities and towns, but even though the pipelines were often going by their fields the farmers were being left out in the cold. It was considered too expensive to serve remote farms, and there was a better business case to be made to ship the gas to California.

So, the founders of the Meota Gas Cooperative did what prairie farmers do best – they took their future into their own hands. Literally through their own muscle power, they created a small natural gas distribution operation that was owned and run cooperatively for its members. The idea flourished, and by 1964, there were enough natural gas co-ops in southwestern Alberta to warrant an umbrella organization, the Federation of Alberta Gas Co-ops Ltd., to represent them to gas producers, regulators and governments.

Advocate for Rural Consumers

The Federation was the first such organization in Canada and now is the largest rural gas distributor in the world.  For almost 60 years, it has represented the views of its members to municipal, provincial and federal governments, helping enhance the lives of approximately 400,000 rural Albertans through natural gas distribution.

Currently, the Federation serves 52 rural gas co-ops, 16 town and villages, five counties and seven First Nations communities across the length and breadth of Alberta. It is a not-for-profit organization, run by an eight-member Board of regionally-elected directors. With 100,000 kilometers of member-owned pipeline in the ground, its role as an advocate has increased to include providing centralized services such as data collection, operations and maintenance audits, easement submissions, training, station meter inspections, and negotiating fair insurance plans for the rural co-ops.

“The Federation is a lobbying body to the government, ensuring that we communicate and advocate for our membership, provincially and federally,” says Executive Director Tom Kee. “We want to make sure that rural amenities and services are the same as urban communities, have competitive rates, and we want to be in the same conversations as investor-owned utilities to deliver services.”

Government Support is Key

Kee acknowledges the largely farmer-run co-ops and the Federation may not have thrived without the substantial support of the provincial government. The provincial 1973 Rural Gas Program supported the gasification of rural Alberta, helping cover the costs of building distribution systems in sparsely populated regions considered non-commercial by both pipeline companies and large utilities.

In 2013, the Federation took over a large portion of the Rural Gas Program, including disbursing grants, providing easement services for co-ops, and ensuring control over the quality of pipelines entering the gas co-op system. While each rural utility is self-sufficient as a company with qualified staff to operate, maintain and build their systems, the Federation provides support through additional training and, increasingly, technology. It also has been developing a geographic information system (GIS) that will link to all the individual co-op systems.

“It has grown from being an umbrella organization helping the co-ops get more opportunities to becoming a one-stop shop in regards to GIS, engineering, health and safety, and measurement,” Kee says.

Exclusive Franchise

Although the number of family farms across the nation has dropped over the past 50 years, there has been no drop in the Federation’s membership. It’s co-ops are provincially mandated to provide natural gas services to new residential, commercial and industrial concerns that come on stream inside their rural franchise areas – which in Alberta means covering about 200,000 square kilometers.

This vast service area led to another exclusive service: the Federation is one of the few organizations in Canada allowed to go out to meter stations in the field to recertify and reseal electronic correctors in service. “The reason is we have 700 stations that are all out in the middle of nowhere, so the ability for us to shut down the meters for a couple of months to take them to a shop isn’t really feasible,” says Kee.

Challenges

With the numbers to back them, the rural co-ops started their own brokerage company, Gas Alberta, to buy natural gas and compete with the other investor-owned utilities. The co-op board or council sets the gas rates, but currently their biggest challenge is maintaining their systems.

Aging natural gas infrastructure and shifting regions of production have seen transmission pipelines that are deemed non-economical be decommissioned, and areas outside of new supply basins struggling to find alternative sources to tap into. Natural gas production also has become more focused in the northwest of the province as reserves in the south decline, but corresponding distribution systems to northeastern communities haven’t kept up.

The costs of building new systems can be prohibitive to the member-owned co-ops, which generally have sparse and small populations. “This has been a real concern for our gas co-ops because sometimes when they have to move their tie-ins along with any pipeline upgrading or rerouting costs, the cost may be in the millions,” says Kee. “It puts Alberta communities at risk of losing their natural gas service.”

Kee noted pipeline giant TransCanada is proposing to construct new transmission lines, expected to be in service in approximately 2021-22.

Vision for the Future

The Federation continues to grow and support its member-owned utilities by representing them to governments, providing new services and up-to-date training so co-ops can remain viable in the evolving natural gas distribution market. Approximately 14 gas co-ops also are shareholders in Corridor Communications Inc., a broadband wireless internet service to rural areas. Others have expanded into heating, installing furnace and hot water tanks.

“The co-ops are always looking at broadening services. We’re not trying to confine ourselves to distribution of gas – we look at other issues, like how to install fibre optic cable while we are installing pipelines,” Kee says.

Participating on committees in the Canadian Gas Association has helped the organization keep up with trends and learn from other members, he notes. And in the past year, the Federation has increased its involvement with the CGA so it can become more involved with other utilities, something that already has resulted in stronger communication with other Alberta utilities.

“That’s what we want to see,” he says. “We want to be all working together as one, and that’s where we see the benefit of being part of the CGA.”

Dina O’Meara has been covering Canadian energy issues for almost 20 years.