Planned expansion of northbound routes for U.S. natural gas exports into Ontario and Quebec can proceed on schedule under a decision that the National Energy Board (NEB) handed down Friday (Nov. 28).
The ruling approved a late-2013 settlement on cooperative pipeline development by TransCanada Corp. and the country’s largest distribution companies: Union (Spectra) in southwestern Ontario, Enbridge Gas in Toronto and Gaz Metro in Quebec.
The deal advances agreed facilities additions but does not cover service losses and costs of replacements due to TransCanada’s proposed C$12 billion (US$10.7 billion) Energy East project for partial conversion of its gas Mainline to oil service.
Settlement features that the NEB accepted include a variation on a mainstay of Canadian pipeline policy, rolled-in tolls that require all shippers to pay costs of new facilities regardless whether they use the additions.
In the Ontario and Quebec settlement case, the rolled-in financing will only affect tolls in a region spanning the two provinces known in TransCanada’s national service network as the Eastern Triangle. No additional costs will be shunted over onto shippers in the western gas-supplier provinces of Alberta, British Columbia and Saskatchewan.
The Eastern Triangle additions concentrate on expanding and improving gas flows originating chiefly in the U.S., especially from the Marcellus Shale production region.
The settlement and the NEB approval resolved disputes triggered by rapid acceleration of Ontario and Quebec imports from the U.S. Volumes have more than doubled over the past five years into the range of 2.5 Bcf/d.
The distributors and big gas users connected to their networks seek access to more eastern U.S. production, as low-cost competition for western Canadian supplies that travel about 10 times as far.
The Ontario and Quebec governments encourage the trend in the name of diversifying supplies and fostering industrial development. Projects attracted by prospects of low-cost gas include Indian Farmers Fertilizer Cooperative Ltd. of New Delhi, which aims to build a manufacturing plant in south-central Quebec and sell products on agricultural supply markets across Canada around the world.
Union and Enbridge are proceeding on projects in their Ontario service territories that have provincial approvals and will improve Quebec access to U.S. shale gas.
In a parallel NEB case, TransCanada is awaiting approval for a short addition to its own network on the western fringe of Toronto that is rated as vital to the co-operative plan, the C$227 million
(US$204 million) King’s North Connection. Service is scheduled to start Nov. 1, 2015.
The NEB kept the planning on schedule by circulating a brief notice of the settlement approval, with detailed reasons for the complex decision to follow later.