New Brunswick seeks Canada-first gas policy for East Coast

Gary Park

PNA Canadian Correspondent

A regulatory challenge from an unlikely source may force Canada’s National Energy Board to examine 15 years of unopposed growth in Canada’s natural gas exports to the United States.

The New Brunswick government, infuriated at its inability to gain access to offshore East Coast gas, wants the National Energy Board to stop “monopolistic” shipments of Nova Scotia gas to the northeastern United States.

New Brunswick Energy Minister Jeannot Volpe said his government, which has no gas production or consumption, wants a Canada-first policy governing incremental sales of gas from the Scotian Shelf.

“Canadians should have the first option,” he said. “We’ve invested hundreds of millions of dollars in the development of those wells. That’s a Canadian product and we feel as Canadians we should have access to it. “Natural gas supplies should remain in our region and benefit the people here. When our needs are met, excess gas should then be exported and sold to customers in the United States,” said Volpe.

A spokesman for the National Energy Board, which issues all energy export permits, said the federal regulator will decide how to handle the New Brunswick application at a later date.

If the National Energy Board moves to a full hearing on New Brunswick’s bid to make Atlantic Canada the exception to “market-oriented” gas exports to the United States it will be the first regulatory test of a policy introduced in 1987.

Before 1987, the Canadian industry was required to prove it had up to 30 years of gas reserves for domestic needs before export permits were issued.

Since then the National Energy Board has routinely approved short-term export contracts lasting less than two years without conducting any inquiries into future supplies unless Canadian consumers can show they are unable to obtain gas on the same terms as U.S. buyers.

Over the past 15 years gas exports have more than doubled to about 3.83 trillion cubic feet a year and are expected to grow by another 1.6 trillion cubic feet by 2020.

But New Brunswick says the export policy has tied the National Energy Board’s hands because Nova Scotia producers have been shipping gas to the United States almost entirely under short-term licenses.

It also pointed out that the export policy was devised when only Alberta, British Columbia and Saskatchewan were gas-producing provinces. Nova Scotia’s Sable field did not come on stream until the end of 1999.

The New Brunswick outrage flared last month when Enbridge Inc. and Gaz Metropolitain and Co. LP shelved plans to build up to C$733 million in new facilities to deliver East Coast gas to New Brunswick and Quebec, completing the final link in a cross-Canada pipeline system.

It blamed opposition from Maritimes & Northeast Pipeline LLC, The Canadian Association of Petroleum Producers, the Nova Scotia government and the East Coast Producer Group of ExxonMobil Canada, Shell Canada Ltd., Imperial Oil Ltd. and Mosbacher Operating Ltd.

Maritimes & Northeast Pipeline, owned 75 percent by Duke Energy Corp. and the monopoly pipeline carrying up to 550 million cubic feet per day from Sable to New England, has argued that the new markets would be too unreliable to justify the costs involved.

Not based on market conditions

The province thinks its argument takes on added urgency with a fresh proposal before the National Energy Board to accelerate the pace of offshore development.

Maritimes & Northeast Pipeline filed an application on March 20 to expand its mainline system to handle gas from PanCanadian Energy Corp.’s C$1.1 billion Deep Panuke project, which is expected to produce 400 million cubic feet per day by late 2004, all of it going to the United States under short-term sales agreements. New Brunswick said Deep Panuke is the “one foreseeable incremental Scotia offshore supply” that it might have access to, given recent disappointing drilling results in the region and surprise cuts in offshore reserves.