Jurisdictional Battle Continues Between Alberta and the NEB
Nova Corp. last week withdrew its opposition to a pipeline
bypass project mounted by Alberta Energy Co., but now the Alberta
government refuses to be prodded into changing by the Canadian
natural gas community's April agreement on allowing competition.
Nova did not come around easily. In a letter to the NEB, Nova
facilities approval manager Rick Geddes repeated his firm's dim
view of AEC Suffield Gas Pipeline. This 70-mile, C$22.8 million
(US$16.5 million), 175 MMcf/d route from southeastern Alberta
across the Saskatchewan boundary to a link with TransCanada
PipeLines at Burstall spells "unnecessary duplication of existing
facilities and the underutilization of NGTL pipeline
infrastructure." Nova only stopped fighting because the April gas
pact included a commitment to seek settlements of conflicts.
Geddes wrote, "The signatories" - including Nova and TransCanada
as well as the Canadian Association of Petroleum Producers and
Small Explorers and Producers Association of Canada - "recognize
that commercially negotiated solutions are to be preferred to
adversarial proceedings as a means to address such issues as those
which arise from the duplication and offloading of existing
pipeline infrastructure." As a result, "NGTL's and AEC Suffield's
efforts would be better spent attempting to reach a commercial
solution to the issues arising from the proposed project outside of
the hearing process."
No quick or easy settlement was reported to the NEB. The rivals
were far apart on tolls for moving gas out of prolific fields on
the Suffield Military Range. The NEB was told that AEC Suffield's
tolls would save shippers C$3.75 million (US$2.7 million) per year
compared even to new, distance-based rates that Nova proposed to
the earlier this spring and remain under negotiation.
The Alberta Department of Energy, however, is after bigger game
than a toll bargain. Its role in the AEC case continues a long
history of zealously guarding the province's authority as well as
revenues owed to its ownership of natural resources under a 1930
amendment to the Canadian constitution.
The provincial government's lawyers insisted the pipeline
proposal belongs under the jurisdiction of the Alberta Energy and
Utilities Board. A formal motion demanded that the NEB either
dismiss AEC's construction application or refer the jurisdictional
question to the Federal Court of Canada.
The province said testimony at NEB hearings showed the project
only pretends to be one that comes under federal authority. The
bypass route around Nova's Alberta grid does not have to cross the
Saskatchewan boundary - and only does because the sponsors feared
that the EUB would delay or reject it, the provincial energy
department said. "The AEC Suffield pipeline project constitutes an
attempt to evade provincial jurisdiction. Where a provincial
undertaking masquerades as a federal undertaking, such a subterfuge
will not avail," the Alberta lawyers said, citing a variety of
court precedents stretching back to the 1950s.
The province is anything but sure of victory. The AEC case was
the second time this year the Alberta government tried to protect
its jurisdiction over gas produced in the province and Nova's
40-year-old role as undisputed master of transporting it. The
energy department lost the first round in a similar case involving
a smaller project by Northstar Energy Corp. to take southwestern
Alberta gas output into southeastern British Columbia.
The NEB rejected Alberta claims to have the final say in late
April, then approved Northstar's C$6.4 million (US$4.6 million)
Coleman Pipeline just before the hearings on the AEC project. The
five-mile Coleman line only goes 30 feet into B.C. to connect with
TransCanada's Alberta Natural Gas, the Canadian inlet to the
Pacific Gas Transmission route to the northwestern United States
and California. The Alberta government maintained the Coleman
project only included a border crossing to duck provincial
authority. But the NEB ruled that a physical "work," as opposed to
a general business "undertaking," automatically becomes a federal
matter as soon as it crosses a boundary. The board said Alberta's
legal staff failed to unearth any legal precedents identifying
"non-legitimate" reasons for provincial boundary crossings.
The NEB also rejected industry critics of Northstar - including
Nova - to send a message that the end is at hand for corporate
privileges and exclusive franchises in the Canadian gas community.
The federal board noted Northstar's line will be in competition
with Nova, and called that the thin edge of a wedge of good.
"It cannot be expected that the whole gas transmission industry
will become competitive and efficient with one regulatory
decision," the NEB said. "However, each step towards a more
competitive market will yield incremental gains that are
beneficial. The immediate effect of this decision will be the
availability of lower transportation costs for Northstar and other
potential shippers from the southern Foothills area. In the longer
term, this decision may help market signals flow to the providers
of pipeline transportation, and their regulators to result in
better system planning choices."
The NEB, perhaps anticipating the gas accord, added: "In
general, the public interest is served by allowing competitive
forces to work except where there are costs that outweigh those
benefits. An important element of competition and market-based
solutions.is the extent to which producers can exercise the choice
to have access to alternative means of getting their products to
Gordon Jaremko, Calgary