TransCanada Corp. moved Thursday to calm a hornets' nest of protest among its natural gas customers in Ontario, Quebec and the northeastern United States by making a formal promise to maintain service continuity.
The pledge was taken in an announcement that industry support has been secured for Energy East, TransCanada's brand name for proposed partial conversion of its gas Mainline from Alberta to eastern Canada, New York, New Jersey and New England to oil service (see Daily GPI, July 8).
In declaring intentions to turn the idea into a C$12 billion project, the pipeline company said, "While Energy East will use a portion of Canadian Mainline capacity, TransCanada is committed to continuing to meet the needs of its gas customers in eastern Canada and the northeastern United States."
The statement followed weeks of sparring over potential effects of the conversion scheme before the National Energy Board (NEB), with gas shippers demanding information and TransCanada saying their queries were premature.
Questions about the oil conversion figure in a formal complaint filed by Canada's top distribution companies -- Spectra Energy subsidiary Union Gas and Enbridge Gas in Ontario, and Gaz Metro in Quebec -- against proposed Mainline gas transportation tariff changes.
The complaint is supported by Alberta Northeast Gas (ANE), a supply procurement consortium of 16 distribution companies in seven U.S. states that have fulfilled fuel demand of seven million customers with western Canadian gas for two decades.
The Mainline's eastern gas customers say the oil conversion scheme, in tandem with proposed changes to transportation contract renewal rules and rates, threaten to generate potentially severe increases in costs and restrictions on supply options.
Apart from TransCanada's goodwill gesture in its Energy East announcement, effects on gas service remain one of the murkiest elements of the oil conversion plan. Questions remain liable to go unanswered for months to come. The announcement set a target of early 2014 for translating results of TransCanada's open-season auction of oil delivery capacity into a project application to the NEB.
ANE observed, in a complaint document filed just before the announcement, that the pipeline company has stayed vague and kept its options wide open, even in responses to information requests from the board.
The latest answer is that eastern gas delivery capacity liable to be lost in the proposed oil conversion could be anywhere from zero to 300 MMcf/d, and the forecast annual cost in tolls for replacing it by adding new facilities ranges from zero to C$65 million, ANE said.
The complaint by the eastern Canadian and U.S. distributors arises from regional differences in the performance of the 3,000-kilometer (1,864-mile) TransCanada Mainline as a national and international gas freeway network.
In the West, the system's total capacity for 7 Bcf/d is more than half empty. The Energy East plan to convert one of six pipelines in the Mainline right-of-way to oil spells gas toll savings by reducing excess hardware and costs. Oilsands producers and the Alberta government are enthusiastic supporters of the conversion, calling its enlarged plan to carry up to 1.1 million b/d nothing short of a "historic" chance to increase sales volumes on widened markets potentially paying stronger prices than saturated traditional export destinations in the United States.
But in the East, the Mainline remains in high demand and heavily used for growing short-haul deliveries of abundant, competitively priced imports of shale gas from the United States into Ontario and Quebec.
Just one day before TransCanada made its Energy East announcement, Union-Spectra and Gaz Metro announced a plan to increase the short-haul gas traffic (see Daily GPI, Aug. 1). The distributors launched an open-season capacity auction for proposed eastern gas pipeline additions, called the Parkway Extension Project after a route into the Ontario and Quebec gas markets. The plan includes connections to the TransCanada system and the Enbridge Gas network in Toronto and eastern Ontario.
The proposal calls for up to 1.2 Bcf/d in new eastern Canadian gas delivery capacity, enabling regional distributors and consumers to increase use of the Dawn storage and trading hub in southern Ontario.
The Dawn complex is central to the growing northbound movement of U.S. shale gas. After six consecutive record years, the annual volume of U.S. exports into Canada is nudging 1 Tcf. The new trade growth plan identifies Marcellus Shale supplies by name as a prime target of Ontario and Quebec gas buyers.