After a hard fight over a small project assigned bigsignificance by the contestants, the National Energy Board (NEB)has upheld the doctrine that has ushered pipeline competition intothe Canadian natural-gas community. An NEB panel under boardChairman Ken Vollman approved a new, producer-sponsored bypass ofthe TransCanada-Nova system in Alberta, rejecting pleas for thefederal agency to stop setting precedents favoring new entries intogas transportation.

Alberta Energy Co. intends to have deliveries under way by fallon the new stretch of pipe, a C$22.3-million (US$15.4-million),97-kilometre (60-mile) route for 190 MMcf/d. The new line titled,the North Suffield Pipeline, will carry production from theSuffield military range in southeastern Alberta across theSaskatchewan boundary to a connection with TransCanada’s nationaland international system.

The area served by the line counts for 3.4 Tcf of provenreserves, and an estimated 4.1 Tcf of undiscovered potential, withthe possibility of more as drilling ventures into new deep rightsacquired recently by AEC. The decision was the second pipelinevictory in the area for the producer, which earlier built a similarbypass for southern Suffield wells.

Shippers stand to save up to C$14 million (US$9.6 million) peryear by switching to North Suffield because its tolls of C13.7cents (US9.4 cents) a gigajoule is a little more than half theC26.1 cents (US18 cents) charged by the Alberta-wide grid ofTransCanada-Nova. The old gas-transportation mainstays warned theNEB that Suffield represented “an important precedent andpolicy-setting case.” By approving North Suffield, the boardconfirmed it is prepared to allow new projects even at a time whenthe Canadian pipeline sector is heading into a period of surpluscapacity. The surplus is estimated to be up to 2 Bcf/d, thanks tothe forthcoming completion of Alliance Pipeline this fall on top ofthe late-1990s expansions by the TransCanada and Foothills systems.Shippers hope it will take years for production to catch up withthe pipeline expansions because they are fostering a buyers’ marketin delivery services in Canada for the first time in the industry’shistory.

It helped AEC that it structured North Suffield as a fully”at-risk” project, pledging to take the chance that it will losemoney on any unused capacity without seeking regulatory decisionsto prop up the tolls. Rather than pipeline profits, “the primarybenefits in the North Suffield case relate to competition andchoice,” the NEB said.

The NEB panel also turned down pleas by TransCanada-Nova for aruling to define the pro-competition doctrine more clearly. Inparticular, to set out some limits about when benefits outweighcosts and vica-versa. Despite repeated attempts by pipelinecompanies and their lawyers to narrow the NEB’s discretion, theCanadian doctrine on competition in gas transportation continues tobe a simple statement: “In general, the public interest is servedby allowing competitive forces to work, except where there arecosts that outweigh the benefits.”

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