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TransCanada’s North Montney NatGas Pipe Draws Widespread Opposition

A strange bedfellows lineup of government, producer, consumer, environmental and native opponents has formed against TransCanada Corp.’s planned rescue pipeline for reserves orphaned by cancellation of liquefied natural gas (LNG) exports from British Columbia (BC).

The Alberta Department of Energy, U.S. Pacific Northwest gas buyers, Alberta producers and BC native and green groups stand in the way of the North Montney Mainline proposed by TransCanada’s supply collection grid, Nova Gas Transmission Ltd. (NGTL).

The C$1.4 billion ($1.1 billion) northern branch line’s addition of 1.5 Bcf/d to eastbound BC flows into NGTL would “flood the AECO market,” said the PMC Group of Peyto Exploration, Modern Resources and Canlin Resources.

“These volumes will displace currently developed and connectable gas,” PMC said at hotly contested project hearings before the National Energy Board (NEB). “In addition, the new volumes will contribute to an oversupply of gas that cannot exit the basin and access new markets due to constraints on the current NGTL system.”

While native and green critics cited threats to caribou habitat from increased drilling, the economic resistance concentrated on a project sore spot: “rolled-in” NGTL grid tolls that would be about 40% cheaper than separate rates that the North Montney Mainline would have to charge as a “standalone” project.

Alberta described the bargain project financing as a recipe for unfair competition that would erode gas prices, cutting the value and pace of industry development under its jurisdiction.

The provincial energy department told the NEB, “Alberta will be negatively impacted by the implementation of rolled-in NGTL tolls for the [North Montney Mainline] project in several ways including the impact on Crown royalties, development of Alberta’s natural gas resources, taxes, timely access to markets, and the employment of Albertans.”

The new eastbound flows would also divert supplies away from long-standing BC gas destinations in the northwestern United States, said American gas and power utilities allied as the Export Users Group and Western Export Group.

The U.S. firms told the NEB their “members rely on producers continuing to want to serve Pacific Northwest markets through the Westcoast system,” NGTL’s Enbridge-owned rival pipeline system in BC. The bargain-basement tolls sought for the North Montney Mainline would “undermine such reliance.”

Eastbound supply diversion by the proposed NGTL addition, away from Westcoast’s southbound network, would rob about 1 Bcf/d from the U.S. Pacific Northwest “even on the coldest high-demand day,” said the U.S. utilities.

The resistance erupted after TransCanada moved last year to convert the Montney line into an NGTL addition from its original purpose as the supply collector for the cancelled Pacific Northwest LNG export terminal project on BC’s north Pacific coast.

The scrapped LNG plan’s Asian sponsors -- Malaysia’s state-owned Petronas, Japan Petroleum Export Corp., PetroleumBRUNEI, IndianOil Corp. and Sinopec-China Huadian -- vowed to develop their BC shale gas properties for North American sales.

The Calgary subsidiary of Petronas, Progress Energy, told the NEB that the Asian group has spent more than C$12 billion ($9.6 billion) on its Canadian gas investment. As a drilling partnership titled the North Montney Joint Venture, the Pacific NorthWest group continues to hold an 800,000-acre spread of supply development prospects in the richest, most accessible northern BC shale gas formation.

Through Progress as operator, the Asian group has signed up for 700 MMcf/d of delivery capacity on the contested NGTL pipeline project. Another 785 MMcf/d of capacity has been sold to Kelt Exploration, Aitken Creek Gas, Painted Pony Petroleum Ltd., Arc Resources, Saguaro Resources, Black Swan Energy, Tourmaline Oil, Canbriam Energy, and UGR Blair Creek.

A disputed NGTL forecast predicted North American markets will soak up North Montney gas because total consumption will grow by nearly 40% to 130 Bcf/d as of 2030 while Canadian annual natural production declines of 2 Bcf/d will have to be replaced.

The project schedule for the North Montney Mainline set target dates of early 2018 to start construction and 2019 for completion. Legislated timelines for NEB cases give the board months to review the regulatory wrangle.

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