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Vol. 13, No. 25 Week of June 22, 2008
Providing coverage of Alaska and northern Canada's oil and gas industry

NEB filing designed to keep tolls low

TransCanada’s application to the National Energy Board designed to make Alberta System more commercially attractive to North Slope, Mackenzie and B.C. natural gas shippers

Kay Cashman

Petroleum News

TransCanada said June 17 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.

‘Win-win’ for TC, Alberta, gas producers

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.”

TransCanada expects feedback on its application from NEB, he said. The second part of the process is to apply for certificates to operate the system.

In the meantime, it will be business as usual for the Alberta System.

“We anticipate business as usual for the Alberta System during and following the regulatory approvals process,” Hal Kvisle, TransCanada’s president and chief executive officer, said. “This includes the continued processing of significant Alberta System matters by the Alberta Utilities Commission while the jurisdiction application is considered by the National Energy Board.”

In May, Kvisle told an Anchorage audience TransCanada is working with Canadian regulators to speed up the regulatory processes there and will work with Federal Energy Regulatory Commission, or FERC, to speed up the regulatory process for the Alaska side of the project.

Keystone, then Mackenzie, then Alaska line

The Keystone project, which will be TransCanada’s “major construction project focus over the next four years,” will be complete by late 2011, early 2012, Kvisle said. At the same time, TransCanada will be investing $2 billion in large-diameter gas pipeline additions in Alberta. ConocoPhillips is TransCanada’s partner in Keystone.

Then will come the Mackenzie Valley project, he said.

Over that five to six year period, “we are going to develop a lot of young people with exceptional capabilities in both technical design and also project management, and we think all of that will position us very well — no better way to get ready to build the Alaska pipeline than to build a lot of other pipelines in the meantime.”

TransCanada’s partners in the Mackenzie Valley project are ConocoPhillips, ExxonMobil and Shell. BP is an explorer in the region, not a pipeline owner.

“And we’re moving that project forward. We haven’t quite resolved all the issues but it’s a much smaller project than the Alaska one,” Kvisle said.

Mackenzie is 700-plus miles of 30-inch-diameter pipe expected to move some 1 billion cubic feet a day to market, compared to 1,700 miles of 48-inch pipe (North Slope to Alberta) moving 4-4.5 bcf a day for the Alaska Highway gas pipeline.

He said they’ve come up with “a structure for the Mackenzie. While we haven’t got that new structure formally sanctioned yet, we’re optimistic that it will work for both the Mackenzie producers and the government of Canada.”

TransCanada’s network of wholly owned pipelines extends more than 36,500 miles (59,000 kilometers), tapping into virtually all major gas supply basins in North America.

The company is one of the continent’s largest providers of gas storage and related services with approximately 355 billion cubic feet of storage capacity.

A growing independent power producer, TransCanada owns, controls or is developing approximately 8,300 megawatts of power generation.

The company’s common shares trade on the Toronto and New York stock exchanges under the symbol TRP.



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