June 17, 2008 --- Vol. 14, No. 64June 2008

TransCanada’s NEB filing designed to keep tolls lows for Alaska gas

TransCanada said today that its subsidiary TransCanada PipeLines Ltd. filed an application with Canada’s National Energy Board, or NEB, to establish federal regulation for TransCanada’s Alberta System, an action designed to provide more competitive transportation rates for the company’s natural gas customers outside of Alberta, including Alaska, British Columbia and Mackenzie shippers.

Currently TransCanada’s Alberta System is regulated by the provincial government, and Alberta legislation precludes TransCanada from acquiring, constructing or operating facilities that transport gas across Alberta borders – i.e. extending the system outside Alberta, although it is not precluded from bringing gas to the system.

Being regulated by NEB would allow the Alberta System to expand lines to hot new natural gas producing areas, allowing for more attractive service offerings to Alberta, British Columbia, Alaska and Mackenzie gas producers.

TransCanada’s plans would also bring the Alberta System closer to TransCanada’s proposed gas line from Alaska’s North Slope by extending a pipeline across Alberta’s border to Fort Nelson in northeast British Columbia along the Alaska Highway.

“Under the current regulatory environment we would have to deliver North Slope gas into the Alberta System at the Alberta border,” TransCanada Vice President of Commercial West Canadian Pipelines Steve Clark told Petroleum News June 17. “In our AGIA (Alaska Gasline Inducement Act) proposal we have identified Fort Nelson as a receiving point. This jurisdictional change sets the stage to do that.”

If NEB turns down TransCanada’s request, a two-step process that is expected to take about 18 months, it won’t prevent TransCanada from delivering Alaska gas into its Alberta system, Clark said.

“Nothing prevents Alaska gas coming to Alberta and hooking in, but by extending the Alberta System it makes it even more commercial,” he said.

Clark doesn’t think NEB will turn down TransCanada’s application, as the company has spent a lot of time talking to its shippers and the provincial government, which has made no secret about its concerns that Alberta’s gas fields are maturing and producing less and less gas. “It’s a very remote possibility,” he said.

“The way we have structured our application we are confident that we have a solid application. It’s just a matter of getting through the process itself. … It’s a win-win for everybody because if we can extend the system by adding gas from outside Alberta it drives down the tolls,” which Clark said meets the province of Alberta’s goal of keeping the Alberta Hub and related economy as competitive and robust as possible.

Increased throughput from locations outside Alberta will benefit Alberta by increasing the physical and commercial flow of gas within and from the Alberta Hub, “making it a more transparent and liquid environment for natural gas buyers and sellers and increasing natural gas liquids supply to straddle plants and petro-chemical infrastructure located in Alberta,” the company said.

“We want a larger commercial hub here,” Clark said, describing “liquid” as “lots of buyers and sellers” and “transparent” as “good price discovery.”

Currently, 11-12 billion cubic feet of natural gas per day is run through the Alberta Hub, but “each molecule is bought and sold five or six times in the hub,” Clark said. “More gas through the system drops tolls (tariffs) for everybody.”

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