Handout/TransCanadaA decision is expected Wednesday on TransCanada’s proposed toll restructuring application for its so-called mainline, which for decades has helped keep Ontario factories running and Alberta coffers full by sending natural gas from wellheads in the west to eastern burner tips.
CALGARY • Canada’s National Energy Board is poised to approve or reject a plan by TransCanada Corp. to rejig the way it charges producers to ship gas from Alberta to Ontario, a decision that will have broad implications for the future of an asset that has served as an industrial backbone for more than 50 years.
A coalition of Ontario municipalities is raising concerns about plans to reverse the flow of Enbridge Inc.’s Line 9 pipeline to Montreal
A decision is expected Wednesday on the Calgary-based pipeline and power giant’s proposed toll restructuring application for its so-called mainline, which for decades has helped keep Ontario factories running and Alberta coffers full by sending natural gas from wellheads in the west to eastern burner tips.
Faced with falling throughput and new competition from shale gas basins located closer to consuming markets in Ontario, Quebec and New York, TransCanada has sought to shift costs for the under-used mainline, which has capacity to move more than 5.5 billion cubic feet of natural gas per day, to more competitive sections of its transportation system in Western Canada.
TransCanada’s fix involved tacking a surcharge of roughly 5¢ per gigajoule to transportation fees in Alberta in order to lower the cost of shipping gas along the 14,101-kilometres-long mainline to roughly $1.45 per gigajoule, or about 60¢ lower than the current interim toll, regardless of whether western producers actually use the cross-country system, RBC Dominion Securities analyst Robert Kwan said in a note.
The proposal would transfer $467-million in costs from east to west and keep the mainline competitive, TransCanada said in filings, prompting howls from gas producers, including, at one point, Encana Corp. and Canadian Natural Resources Ltd. They argued TransCanada, as owner of the pipeline, should bear the brunt of costs associated with declining eastbound shipments, which in recent years have fallen so low that the pipeline has, at times, been flowing two-thirds empty.
The standoff played out in four months of hearings and laid bare the competitive challenges facing Canada’s natural gas industry, which in recent years has watched its market share in the United States evaporate with the ascent of shale gas, said Ed Kallio, director of gas consulting at Ziff Energy Group in Calgary.
“You have Eastern Canadians who really are not interested in that gas,” he said in a telephone interview Tuesday. Ontario gas users are increasingly drawing on large quantities of U.S. product, bypassing the TransCanada pipeline and displacing Alberta’s former commodity cash cow in the process.
The future doesn’t look much brighter, as proposals to liquefy and ship gas overseas multiply on Canada’s West Coast and continued oil sands production together siphon volumes away from the pipeline, he said.
TransCanada, which has proposed converting a portion of the beleaguered pipeline to oil service, predicted in its restructuring application mainline receipts at Empress, Alta., the jumping-off point for eastbound gas shipments, of 3.4 bcf/d, Mr. Kallio said. So far this year, they’re at 2.4 bcf/d, he said.
“The reality is that where the gas is growing is not where TransCanada has its pipe, and that has to be addressed at a regulatory level and recognized,” he said.