Oil Patch Insider

TransCanada opts for peace

Decades of animosity between TransCanada, by far the largest carrier of Canadian natural gas, and producers show their first signs of a course correction.

Sour from TransCanada’s beginnings half a century ago, the relationships turned downright nasty in the mid-1990s when producers linked up to finance the Alliance pipeline from northern British Columbia to Chicago.

Since then the two sides have butted heads over pipeline tolls in an annual ritual that more closely resembled the animal world than a sophisticated business.

While its pipeline rival Enbridge signed rate of return agreements with producers before seeking the approval of regulators, TransCanada stuck with costly showdowns before the National Energy Board — until this month.

For the first time since 2001, TransCanada signed a negotiated settlement with shippers and other interested parties for tolls on its Canadian mainline gas system — a deal that is expected to gain quick ratification by the federal regulator, which will also likely set final tolls in the second quarter.

The agreement sets the fixed operating, maintenance and administration costs for the mainline at C$169.5 million for 2005, virtually unchanged from last year’s costs. TransCanada will swallow any costs over and above that figure.

Chief Executive Officer Hal Kvisle said in a statement that his company was “pleased to have reached this settlement through a collaborative effort with the negotiating parties.

“The settlement represents a balance of interests and demonstrates our commitment to develop mutually-beneficial solutions with our customers.”

Those were uncharacteristically soothing words for producers, which set the stage for TransCanada to try wooing producers to its side for the Canadian section of the Alaska gas pipeline and its latest plan for a US$1.7 billion oil sands pipeline from Alberta to Illinois — both of them potential showdowns with Enbridge.

But TransCanada is still in a catch up mode after losing its attempts to head off the Alliance pipeline that had its origins when 22 producers decided they no longer wanted to be beholden to TransCanada.

Having passed up chances to take an equity stake in Alliance, TransCanada turned its back on the 1,800-mile system that has capacity for 1.55 billion cubic feet per day and is now owned 50-50 by Enbridge and Fort Chicago Energy Partners.

—Gary Park