The Nova Scotia government has expressed fears that growth of Canada’s embryo East Coast gas industry will be stunted by any interference with exports. EnCana Corp. also has told the National Energy Board (NEB) that it needs unfettered access to markets in the northeastern United States in order to go ahead on its first addition to East Coast supplies beyond the Sable Offshore Energy Project (SOEP), the C$1.1 billion (US$733-million), 400 MMcf/d Deep Panuke proposal.

In a hotly-contested regulatory duel over an appeal from the New Brunswick government to the NEB to clip a leash on East Coast exporters, EnCana says that while it is willing to consider domestic sales and exploring possibilities in the maritime provinces, Quebec and Ontario, it cannot afford to rely only on Canadian outlets. The company’s submission to the NEB says “to ensure economic development…EnCana requires access to markets that can absorb the daily production of Deep Panuke gas.”

Unrestricted use of Maritimes & Northeast Pipeline (M&NP) to the Boston area, which is proposing an 80% expansion to handle Deep Panuke production, represents a critical ingredient for the project: “access to the liquid and diverse U.S. Northeast market.” EnCana said that while it has filed applications for the production project, it will not make a decision to go ahead until the regulatory rulings are handed down. The company says it requires adherence to “general development principles” including: “The project will be competitive with other investment opportunities available to EnCana. The project will serve natural gas customers on a competitive basis, on reasonable terms and conditions. Commercial arrangements for the project will ensure that access to the North American pipeline grid is assured.”

The case centers on an attempt to protect East Coast gas supplies for Canadians by the New Brunswick government. It wants the NEB to replace its rubber-stamp approvals of short-term export transactions lasting two years or less with thorough policing. New Brunswick seeks full advance disclosure of all export arrangements, no matter how short or small, plus opportunities to object in every case. New Brunswick is supported by the Prince Edward Island government, would-be gas users McCain Foods Ltd. and Maritime Electric Co, and civic and political representatives of districts directly affected by gaps in the fledgling Atlantic Canadian pipeline system.

The Nova Scotia government told the NEB it understands that the Canadian East Coast is on probation with the gas industry, even though it has made about C$1.5 billion (US$1 billion) in work commitments to secure a portfolio of nine-year offshore drilling leases. With wells costing up to C$90 million (US$60 million) each, the region qualifies as “high-risk” and drilling decisions “are made carefully by industry,” Nova Scotia acknowledged.

“Because of the significant risk capital involved, offshore exploration and development tends to be done by large, multinational exploration and production companies. In Nova Scotia’s offshore area, the largest land positions are held by companies such as ExxonMobil, Shell, BP, Chevron, EnCana, Imperial Oil, Kerr-McGee and Marathon.”

The Nova Scotia government points out that the big firms, including EnCana, have operations and prospects spanning the globe from Angola to Brazil, the Gulf of Mexico and the North Sea. “Prospects offshore of Nova Scotia are ranked against other worldwide opportunities…implementation of the position taken by the province of New Brunswick will negatively affect the competitive position of Nova Scotia.”

The Canadian Association of Petroleum Producers drove home the politely-worded warning from EnCana in blunter language. SOEP and M&NP went into operation in late 1999 because the industry had “confidence in Canada’s market-based energy policy,” CAPP said. The producer group, which represents 97% of Canadian gas output, said “if the policy had been that Scotian offshore natural gas development was to be held captive for a protected Maritime regional demand, there would have been no SOEP and no M&NP. Maritime demand then, as now — and as it has been for over 40 years (of previously futile attempts to introduce natural gas service in the region) — is not sufficient to economically support this development…Scotian gas development is in its infancy. The growth of this new supply area depends on continued and unrestricted access to the U.S. market.”

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