A friend in high places has stepped forward to support TransCanada Corp.’s plan for enabling growth in U.S. shale gas exports to Ontario and Quebec by working with their distributors on additions to northbound pipeline capacity.

The Ontario Ministry of Energy is praising TransCanada’s settlement with Union Gas, Enbridge Gas and Gaz Metro (see Daily GPI, Dec. 30, 2013) as an advance for provincial ambition to break away from generations of expensive reliance on supplies from distant Alberta.

In a filing with the National Energy Board (NEB) the ministry predicts the pact will have positive effects throughout the Eastern Triangle, the official gas market name for the Ontario and Quebec consumer side of TransCanada’s national Mainline. The ministry predicts “the agreement will result in infrastructure improvements in the Eastern Triangle that will increase market access and improve supply diversity for Ontario natural gas consumers.”

In case the national agency missed it, attention is drawn to further official encouragement by a Jan. 30 decision of the Ontario Energy Board (OEB) to approve the first big capacity addition on the agenda of TransCanada and the distribution companies.

The decision authorized construction of C$425 million (US$382 million) capacity additions to a leg of the Union transmission and distribution network known as Dawn Parkway. Union is still awaiting approval of federally regulated aspects of the project from the NEB, but has predicted a favorable decision in time to start construction this spring and put the new capacity into service by late 2015.

The facilities include 14 kilometers (eight miles) of jumbo pipe 48 inches in diameter plus large compressors to drive high volumes of gas. The project will expand traffic through the Dawn storage and trading hub in southwestern Ontario, making increased imports possible across the connected systems of Union, Enbridge and Gaz Metro.

“The settlement agreement is an important development in the evolution of the pipeline transportation network in Ontario,” the OEB decision said. “It seeks to provide a basis for the eastern distributors to access new sources of supply while ensuring that the financial viability of the TransCanada system is not threatened by de-contracting.

“Stable commercial relationships between TransCanada and the eastern distributors are desirable from a public policy perspective.”

The settlement ended months of hot feuding before the NEB, the OEB and its Quebec counterpart that boiled over into a mammoth lawsuit, with TransCanada demanding C$4.5 billion (US$4 billion) in damages for planned bypasses of its Mainline.

The plan calls for both immediate and long-range co-operation, possibly continuing for decades, on adding facilities for Canadian imports of low-cost shale production, chiefly from the nearby Marcellus formation in the northeastern United States. The settlement agenda provides for C$391 million (US$352 million) in additions to TransCanada’s share of northbound freeways for U.S. gas during the next three years alone.

Nearly 80% of Canadian imports to date flow north through a border crossing beneath the St. Clair River between Michigan and Ontario near Sarnia, ON, according to trade records kept by the U.S. Department of Energy. But the latest scorecard, posted last week for third-quarter 2013, shows U.S. exports have also begun going north through connections in the Buffalo, NY, and Niagara Falls region where flows were recently reversed after carrying southbound Canadian deliveries to the U.S. for about half a century. After more than doubling since 2008, annual U.S. gas exports to Canada are within sight of topping one trillion cubic feet.

As a potential next big step in the trade about-face the TransCanada-controlled Iroquois Pipeline recently completed an “open-season” capacity auction to test market interest in reversing its flows to deliver Marcellus gas into Canada starting in November 2016, a plan dubbed the South-to-North Project or SoNo for short. Results of the Iroquois industry canvass were under review and none have been disclosed yet.

Iroquois has delivered western Canadian supplies to a consortium of New England, New York and New Jersey distributors throughout its 22-year lifespan to date, with Alberta Northeast Gas (ANE) serving as a procurement agency.

The ANE group and TransCanada were closely aligned originally. Long contracts for shipments of western supplies to the northeastern U.S. underpinned construction of both Iroquois and C$2.6 billion (US$2.3 billion) in supporting additions to the TransCanada Mainline.

But the new deal among TransCanada, Union, Enbridge and Gaz Metro has broken up the old coalition. ANE is fighting the Canadian import facilities additions as liable to generate substantial toll increases across the entire Mainline from Alberta to Quebec, and northeastern U.S. distributors have fired off filings with the NEB in support of their western supply agency (see Daily GPI, Jan. 24).

The board is reviewing demands by the protestors to rate the deal as a fresh application for new tolls and services, requiring far more detailed and prolonged review than the procedure for ratifying a settlement.