East Tennessee Seeking Interest in Expansion
East Tennessee Natural Gas, a unit of Houston-based El Paso
Energy, is holding an open season for incremental capacity along
its mainline in Tennessee and Virginia. The proposed expansion
would entail construction of mainline pipeline, compression and
related facilities. Service is targeted to begin Nov. 1, 2000.
Since 1996, El Paso has added more than 75,000 Dth/d of capacity
to East Tennessee, an increase of more than 10%. All the expansions
received rolled-in rate treatment, said Bryan Neskora, manager of
business development for El Paso.
"The existing customers are growing. East Tennessee is really a
subset of the whole Southeast, which is just growing by leaps and
bounds with a lot of industrial growth in the area," Neskora said.
East Tennessee is in the middle of a project right now. Called the
Virginia expansion, the first phase in Virginia has been completed.
Work in Tennessee will take place this summer with completion
expected by November. "That's a fairly small expansion. It's a
little over 10,000 Dth/d. That's a combination of shippers in
Tennessee and Virginia."
This new project will allow shippers to access supply from the
Northern Border and Alliance Pipeline projects as well as the Gulf
Coast and Texas.
The size of the expansion will be determined by the results of
the open season, which closes at the end of April. Interested
parties should send a written request for service to Neskora at El
Paso Energy, P.O. Box 2511, Houston, TX 77252, Fax: (713) 420-2369,
no later than 5 PM CST, April 30. For questions call Neskora at
(713) 420-2655, or Bill Wickman at (423) 694-1677. Joe Fisher,
CAPP, Nova Agree to Distance-Based Tolls With Discounts
A lingering sore spot has been healed in the Canadian natural
gas community by a deal between producers and TransCanada PipeLines
Ltd. for new tolls on the 80% of the nation's gas output that
travels on the Nova grid in Alberta.
The agreement cures the original irritant, replacing uniform,
"postage-stamp" tolls with distance-based charges, but softens the
blow. Northern producers earn savings to the extent that they ship
high volumes to spread thin the costs of pipeline facilities. There
are also savings for long-term contracts.
Under the old regime, created by the Alberta government in 1980
as an incentive to develop gas no matter where it is found,
TransCanada reported the postage-stamp toll would be C27.7 cents
(US18.5 cents) per Mcf this year. In the new system, charges will
range from C19.9 cents to 35.9 cents (US13.3-24 cents) for
shipments bound for out-of-province destinations via Nova
connections with long distance pipelines.
Rates for each producer will vary depending on the diameter of
pipe they require, as well as the distance between their receipt
points on the Nova system and the delivery destinations. In theory,
reasonably large Canadian producers with portfolios of production
rather than single sources could come out even or even save money
because reduced rates for southern fields will offset increases for
northern output. In addition to earning savings with high
production volumes, shippers can obtain 5% discounts for committing
to five-year transportation contracts. Shippers that only take on
one-year commitments will pay 5% penalties, while three-year
contracts carry the standard rates.
The new system also continues discounted "load retention rates"
that Nova began offering before its takeover by TransCanada,
chiefly to PanCanadian Petroleum Ltd. in exchange for its agreement
to abandon a major bypass project called Palliser in southern
Alberta. The load-retention deal was the trigger that set off
about two years of wrangling and negotiation which culminated in
the new agreement. The deal was not reached easily. Besides
igniting hostility towards Nova, the Palliser affair badly divided
producers because many in Canada make specialties of regions.
PanCanadian, for instance, as heir to 19th-Century land and
minerals grants associated with construction of the Canadian
Pacific Railway, has been nicknamed "the sleeping giant" because of
its ability to ramp up production almost overnight on its wealth of
southern Alberta properties. Palliser was designed as an
alternative to postage-stamp Nova rates that included costs of
long-distance shipping, with savings of about 40% projected. On the
other side stood major producers like Anderson Exploration, which
is built on prolific but distant gas fields in the Peace River
region of northwestern Alberta and northeastern British Columbia.
The new agreement was only possible because of its discounts for
high-volume shipping and long-term service contracts, which took
months to negotiate, plus another concession. To close the deal,
TransCanada committed to pay 25% of the retention rate's cost
rather than try to collect the whole amount by spreading the bills
around all shippers' tolls.
The new system avoids increases in the Nova system's overall
revenue requirements. There will also be a five-year transition
period for phasing in the new tolls, with costs covered by
contributions of C$25 million (US$16.7 million) from TransCanada
and C$20 million (US$13.3 million) from shippers out of an account
created for savings by an earlier incentive-tolling agreement on
splitting gains from efficiency improvements.
An application to enact the deal, currently a memorandum of
understanding between TransCanada and the Canadian Association of
Petroleum Producers, will be filed within weeks at the Alberta
Energy and Utilities Board.
Gordon Jaremko, Calgary