NGI The Weekly Gas Market Report / NGI All News Access

Alberta Passing NOVA Regulatory Torch to NEB

A bygone era of fierce economic independence is fading into history as Canada's main natural gas-producing province, acting in the name of industrial efficiency, quietly allows a once-unthinkable transfer of jurisdiction to the federal government.

After half a century as an industry pillar ruled exclusively by Alberta, the NOVA natural gas pipeline web will pass into Ottawa's hands without provincial resistance. "We're not intervening," Alberta Energy spokesman Jason Chance said after TransCanada Corp. announced the filing of an application for the National Energy Board (NEB) to take over supervision of the 23,500-kilometer (14,700-mile) provincial gas delivery grid.

The switch will pay off in improved traffic, supplies and regulatory efficiency as Alberta evolves into an international gas trade hub with new NOVA branch lines reaching beyond the province's borders, predicted Chance, an aide to Energy Minister Mel Knight.

The government accepts that times have changed since the original grid was built in 1954 as Alberta Gas Trunk Line (AGTL), with a corporate charter enacted by the provincial legislature to create an independent delivery service, he said. AGTL was born as an Alberta investor-owned and provincially supervised network of routes between all gas fields and inlets to national and international pipelines.

A special founding stock sale gave Alberta residents first rights to own their piece of the pipeline action, and although a majority of the shares eventually migrated to central Canadian owners the province remained in command through regulatory policy and a voice on the board of directors. For decades NOVA's chief executive officer was customarily regarded as the provincial premier's key link into the corporate world and economic adviser. The province fiercely defended its jurisdiction over the grid as a counter to greater economic power of gas consumers, especially in central Canada.

Besides serving as a bargaining tool, the grid was structured to ensure that gas drilling reached out to every corner of the province where reserves could be found.

For standardized tolls akin to postage stamps, which cost the same regardless of distance traveled, the AGTL web enabled gas producers to shop around for the best available sales contracts and prices that also spun off the greatest provincial royalties. Tolling policies also ensured that gas was developed on an equal footing, at least in transportation costs, from the readily accessible southeastern plains to remote northern and Rocky Mountains foothills regions.

The old regime unraveled in the late 1990s, when gas deregulation across Canada and the United States heightened pipeline competition. In Alberta, Alliance Pipeline bypassed the old grid to connect northern wells, especially in the younger and still-growing production region of British Columbia, directly to Chicago. Bypasses also developed to undercut the old postage stamp toll regime in southern Alberta and along the province's eastern border with Saskatchewan.

AGTL, which was renamed NOVA in a 1970s corporate reorganization, was taken over by TransCanada 10 years ago. The planned switch in regulatory oversight, away from the Alberta Utilities Commission and into the NEB's arms, will enable expansion of the NOVA grid beyond the province's boundaries, TransCanada President Hal Kvisle said. "Integrated" provincial, national and international service and tolls under federal supervision will make NOVA the route of choice to markets for new gas production expected to grow in British Columbia, the Northwest Territories and eventually Alaska, Kvisle said.

The change will also help Alberta petrochemical plants because rising gas traffic will increase supplies of raw materials they obtain from liquid byproducts extraction facilities attached to NOVA lines, TransCanada predicted.

Despite consensus forecasts of dwindling production from aging Alberta gas fields, the NOVA grid continues to transport more than 10 Bcf/d. Total traffic exceeded 4 Tcf last year, or more than two-thirds of Western Canadian production and 16% of all North American gas output.

TransCanada told the NEB that since the 1998 takeover the NOVA system has been fully absorbed into integrated control, operation and management of its mainline and Foothills long-distance systems.

©Copyright 2008 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus