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One-stop shopping in Canada NEB decision to place TransCanada’s Alberta pipeline network under federal jurisdiction smoothes way for B.C. and Arctic producers Gary Park For Petroleum News
TransCanada has put two key building blocks in place to lock up a lead role in carrying gas from the British Columbia tight and shale plays and, if the projects go ahead, gas from Alaska and Mackenzie Delta.
In one of its most significant pipeline rulings, Canada’s National Energy Board has placed TransCanada’s Alberta network under federal jurisdiction, removing a major roadblock in the way of getting new gas to Alberta’s AECO hub, the largest trading point in North America.
The result is that the NEB will regulate 23,500 kilometers of pipeline in Alberta that, until now, have been under the control of the Alberta Energy Resources Conservation Board.
The immediate initial benefit will be felt in northeastern British Columbia’s fast-emerging Montney-Groundbirch tight gas and Horn River shale gas basins.
Rolled-in tolls an issue Under federal regulation, TransCanada will be able to apply to the NEB for permission to extend its Nova Gas Transmission system (acquired by TransCanada in 1998) across the Alberta border into British Columbia with rolled-in tolls.
Stephen Clark, a TransCanada vice president responsible for Western Canadian pipelines, told reporters the NEB ruling allows his company to integrate pipelines from new production growth areas into the Alberta network, which in turn connects with TransCanada’s main lines to Eastern Canada and the United States.
Eventually that could include a Mackenzie Valley pipeline, for which TransCanada has claimed the primary transportation rights, and an overland pipeline from Alaska, which has TransCanada and the Denali partners BP and ConocoPhillips, in competition to secure producer backing.
Clark said the big change under the new regulatory regime will allow TransCanada to go directly to producers with offers of rolled-in tolls — something not currently permitted under Alberta legislation — reducing the “economic hurdles producers face to get to the Alberta hub.”
He said tolls for all shippers will be reduced by allowing more gas into the Alberta network, where current volumes are about 10.6 billion cubic feet per day, but have been declining as production has started to shrink in the Alberta portion of the Western Canada Sedimentary basin, and by feeding gas into other downstream pipelines, many of which have unused capacity.
Clark said that keeping pipelines operating closer to capacity will see the benefits ripple through the whole grid across North America.
Kvisle: increases likelihood of future Alaska integration TransCanada Chief Executive Officer Hal Kvisle said in a statement the jurisdictional shift increases the likelihood that northern gas from the Northwest Territories and Alaska could integrate directly with the Alberta hub.
The NEB concurred with TransCanada’s argument, made in hearings last year, that the Alberta and Foothills systems along with the TransCanada mainline are effectively a single operation to deliver gas to markets in Canada and the United States.
The federal regulator said there is clear evidence that these systems are functionally integrated and share common management, control and direction.
While TransCanada became owner of Nova gas Transmission after its merger with Nova, the Alberta system continued to function under the Alberta energy regulator based on the original charter which prohibited the network from operating outside Alberta,.
But the growth of production in British Columbia now means that 7.5 percent of gas carried on the Alberta system originates outside the province.
The NEB ruling also includes the operation of projects approved, but not yet constructed, including the C$923 million North Central Connector in Alberta.
Pipeline landowner associates had raised concerns at the NEB hearings about how their members would be affected by a jurisdictional shift, but the NEB decided the consultation program promised by TransCanada was adequate.
B.C. binding agreements The verdict coincided with the latest binding agreement between TransCanada and British Columbia shippers.
This time TransCanada said it has secured backing for 378 million cubic feet per day from Horn River, which includes a 90-mile pipeline costing C$340 million and scheduled to start service by mid-2011.
Earlier in February, TransCanada obtained commitments from shippers for 1.1 billion cubic feet per day by 2014 from the Montney-Groundbirch region, with the C$250 million pipeline targeting an in-service date of 2010.
Kvisle said the “positive commercial response” to the binding open seasons sets the stage to add “future capacity … as the right opportunities present themselves.”
The Alberta Energy Resources Conservation Board, which will continue to regulate 400,000 kilometers of pipelines in Alberta, has no plans to appeal the NEB decision so long as it is satisfied that “every aspect of the operation is regulated … and there are no regulatory gaps.”
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