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Union Gas Joins Calls for TransCanada to Build Separate Oil Pipeline

A second central Canadian natural gas distribution company stepped forward Friday with a demand for TransCanada Corp. to pay all costs of partially converting its Mainline to oil service.

In southwestern Ontario, Union Gas (Spectra) issued a statement that seconded calls by Quebec’s Gaz Metropolitain for TransCanada to leave the current Mainline’s eastern leg alone and build a separate, entirely new line for oil.

As unveiled in applications filed Thursday at the National Energy Board (NEB), TransCanada’s Energy East oil conversion plan seeks to replace lost gas capacity on a 250-kilometer (156-mile) eastern leg of its national Mainline with a new C$1.5 billion (US$1.3 billion) pipeline for 600 MMcf/d (see related story).

Union pledged support for “the concept” of the overall C$12 billion (US$10.7 billion) Energy East scheme to convert vacant capacity on its westbound national Mainline out of Alberta and add an extension from central Quebec to the Atlantic coast of New Brunswick.

“However, TransCanada’s proposal to convert a critical and fully used natural gas pipeline between North Bay [in western Ontario] and Ottawa [on the Quebec boundary] to oil and replace it with a smaller and more expensive new gas pipeline is unacceptable,” Union said.

“The proposed smaller replacement natural gas pipeline would reduce the existing pipeline capacity in the east by approximately 20% and is the equivalent of eliminating natural gas capacity for half a million Ontario and Quebec homes and businesses.”

The distribution company said TransCanada has a record of underestimating demand for gas service in Ontario and Quebec.

Since 2008, the central Canadian provinces have become hotbeds of short-haul imports from the Marcellus Shale production region in the United States. U.S. exports into central Canada have more than doubled to nearly 1 Tcf per year. NEB gas trade records show the northbound traffic averages about 2.6 Bcf/d.

In the response to the NEB applications, Union President Steve Baker said, "We support the development of new infrastructure and there is a simple solution to ensure our support for the project: TransCanada should leave the existing and fully used gas pipeline in place, and build and pay for a new oil pipeline from North Bay to Ottawa.”

TransCanada and the gas distribution companies in Ontario and Quebec have been debating capacity effects and cost consequences of the Energy East scheme for about a year, Baker said. The NEB applications shift the argument into a formal public arena for complex regulatory wrangling that is projected to last more than a year.

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