Natural gas is a fossil fuel. It originates from the remains of plants and animals that lived millions of years ago. These organisms were buried and exposed to heat from being highly compressed underneath thousands of metres of soil and rock. These forces transformed the once-living organisms into natural gas. It is a hydrocarbon, which means it is made up of hydrogen and carbon compounds. The simplest hydrocarbon is methane. It contains one carbon atom and four hydrogen atoms.

Natural gas is combustible and burns more cleanly than some other energy types. It is one of the most highly used energy sources.

Natural gas can be measured in a variety of ways, although the most common unit of measurement is the gigajoule (GJ). This signifies 1 billion joules, the metric measure for heat or energy. Other measures are thousand cubic feet (Mcf) and British thermal unit (Btu).


Natural gas is found in reservoirs beneath the surface of the earth. Large layers of rock trap the natural gas as it tries to float to the surface. The areas where the gas is trapped are referred to as pools. But the natural gas molecules are actually held in small holes and cracks throughout the rock formation.

Geologists, using sophisticated technology, help locate potential pools of natural gas, so they know where to drill a well to extract gas. Due to the complexity of locating natural gas trapped many metres, and sometimes kilometres, below the surface, the exploration process is not always successful.

Once removed from an underground reservoir, the natural gas is usually transferred to a gas-processing plant to remove impurities and by-products. Some of these by-products, including ethane, propane, butane, pentanes and sulphur (usually from sour gas*), are extracted for other uses. After being processed, the clean natural gas (almost pure methane) is transported through a network of pipelines and delivered to its point of use, including our homes.

*Sour gas has more than 1% hydrogen sulphide (H2S). About 1/3 of the gas produced in Alberta is sour, which accounts for nearly 85% of Canada's sour gas.


Approximately 49% of Alberta’s natural gas production is consumed here in Alberta. Alberta's residential and commercial sectors account for 17%. The remaining 83% of natural gas consumed in Alberta is used by the industrial, electrical generation, transportation and other sectors. Natural gas is also an important raw material for the province’s oil sands and electric power-generation industries.


Natural gas is an environmentally preferred source for electricity generation. The most common use for natural gas around the home is for furnaces and hot water tanks. Natural gas can also be used to operate various household appliances, including stoves, clothes dryers, fireplaces and barbecues.


Schools, office buildings, hotels, restaurants and many other commercial enterprises use natural gas. As with residences, gas is used for heating, cooling and cooking. Large commercial enterprises are also beginning to use natural gas for on-site electricity generation as an economical alternative.


More than half of the natural gas consumed in Alberta is used by the industrial sector. It is used in petroleum refining, metal, chemical, plastic, food processing, glass and paper industries. The ingredients for plastic, anti-freeze, fertilizer and fabric products are formed through the use of natural gas by-products. The fact that natural gas is one of the cleanest, cheapest and most efficient sources of energy makes it easy to see why it is so commonly used.

The majority of Canadian natural gas production comes from Alberta. (Canadian Energy Regulator)

Alberta infrastructure

Alberta is home to one of the largest natural gas infrastructure in North America. Through our large networks of pipelines, gas is gathered from inside and outside Alberta. It is then transported through numerous export transmission lines to many high-demand markets. The TransCanada Mainline is Canada’s main interprovincial pipeline and one of the world’s longest gas pipelines. This pipeline extends from Alberta’s eastern border to Montreal.

There are 3 types of natural gas transportation pipelines:

  • Gathering (raw natural gas directly from the wellhead to the gas-processing plant).
  • Transmission (highly pressurized and processed natural gas sent in large volumes over great distances): From the transmission pipelines, the gas flows into a low-pressure distribution system. As a safety precaution, utility companies add an odorant to the gas for easy detection in case of a gas leak in homes or businesses.
  • Distribution (supply gas to homes and businesses): Distribution companies decrease the pressure with a regulator before it reaches the consumer. Meters measure the gas that is consumed.

Alberta also has a large amount of storage capacity, which aids in the functioning of the infrastructure. With Alberta’s production capability, its storage capacity and its export pipeline network, the Alberta infrastructure is considered one of the most important in North America. The importance of the Alberta infrastructure is reflected in the fact that the Alberta gas-trading price (the AECO “C” spot price) is one of North America’s leading price-setting benchmarks.

The Alberta infrastructure is part of a North American network linking 500,000 km of pipelines and accessing markets representing more than half of North America’s combined natural gas.

Gas royalty operations and regulators

The Department of Energy and Minerals ensures Albertans continue to receive the full value from their gas resource. It promotes and encourages responsible exploration and development of Alberta’s natural gas resources. It uses reported production from the energy industry to calculate and collect gas royalties.

The department administers rates and programs for the continued development of gas and gas products and promoting new technologies for its recovery while reducing industry environmental impact.

The Alberta Utilities Commission and the Alberta Energy Regulator (AER) regulate exploration, production, processing, transmission and distribution of natural gas within the province. The AER is also responsible for the integrity and safety of sour gas operations and annual reporting of the ST98 supply and demand outlook. The federal Canadian Energy Regulator (CER) regulates interprovincial trade in natural gas and approves transportation charges for interprovincial transportation. It also issues long-term licences and short-term orders (up to 24 months) authorizing exports from Canada.


Connect with Gas Royalty Operations:

Hours: 8:15 am to 4:30 pm (open Monday to Friday, closed statutory holidays)


Email: [email protected]

Alberta Energy and Minerals
Gas Royalty Operations
7th Floor, North Petroleum Plaza
9945 108 Street
Edmonton, Alberta  T5K 2G6


Email: [email protected]

Alberta Energy and Minerals
Pricing and Analysis
Centennial Place
1050, 250 5 Street SW
Calgary, Alberta  T2P 0R4