Natural gas distribution companies in New England, New York and New Jersey have joined their Ontario and Quebec peers in demanding a reprieve from TransCanada Corp.’s C$13.5 billion (US$12 billion) plan for a swift eastern pipeline overhaul.
As the Canadian supply procurement agency for 16 distributors in the United States, Alberta Northeast Gas Ltd. (ANE) calls the scheme “tainted” by failure to consider the legacy of continuing need for service by TransCanada’s 55-year-old natural gas Mainline.
In a 14-page letter filed with the National Energy Board, ANE supports protest by Union Gas (Spectra), Enbridge Gas and Gaz Metro -- partnered as the Eastern LDCs -- against the overhaul’s projects: the C$12 billion (US$10.7 billion) Energy East partial conversion of TransCanada’s Mainline to oil service, the C$1.5 billion (US$1.3 billion) Eastern Mainline proposal for a new conduit to replace lost gas capacity, and an associated asset transfer.
ANE endorses the Eastern LDCs’ request for the NEB to declare the project applications “deficient,” order further review of gas capacity losses they will cause, and direct TransCanada to hold a new “open season” auction of delivery contracts as the only way to paint an accurate picture of demand for service.
The request arises from regulatory efficiency reforms enacted by Canada’s federal Conservative government in 2012. The NEB will have to comply with a 15-month deadline to rule on TransCanada’s applications if they are accepted as complete.
In preparing the proposal for the Mainline partial conversion to carry 1.1 million b/d of Alberta bitumen, including new overseas tanker exports, “the bedrock or starting point for TransCanada's consultations has been the position that the gas assets are pre-ordained for oil use,” ANE says.
A conviction that soured the consultations prejudged NEB decisions on the 30,000 pages of applications for project approvals, says ANE: “Any estimated continued need for the gas assets would be satisfied through the construction of new, replacement facilities.”
ANE says, “That bedrock position, unilaterally taken by TransCanada without gas shipper or board input or approval, has tainted the entire consultation process such that it cannot serve as a reasonable estimate of gas market needs in the EOT [Eastern Ontario Triangle].”
The Energy East proposal bears no resemblance to the Mainline conversion in Alberta, Saskatchewan, Manitoba and northern Ontario that the NEB approved in 2006 for the successful first half of TransCanada’s Keystone oil export project into the U.S., ANE says.
The western pipe segments had chronic and growing excess capacity due to depletion of aging wells, rising use of gas as fuel by Alberta thermal oil sands extraction projects, and the dawn of U.S. shale supply competition on Ontario and Quebec markets.
“The present circumstances with regard to the EOT are vastly different from Keystone 1,” ANE says. Eastern legs of the Mainline serve a thriving market for both U.S.- and Canadian-sourced gas travelling through the Dawn storage and trading hub in southern Ontario, the consortium emphasizes.
The northeastern U.S. gas procurement agency points out that it kept all 200 MMcf/d of its firm capacity on the TransCanada network in Ontario and Quebec that came up for renewal Oct. 31.
TransCanada service booking reports show that marketers intend to use more than 500 MMcf/d of Mainline EOT firm capacity to fill the Iroquois and Portland export routes into the northeastern U.S. in the coming heating season, ANE adds.
“The fact that the [eastern] gas assets are used and utilized and there will be a continuing need for them distinguishes the present case in the most fundamental manner from Keystone 1,” ANE says.
The U.S. distributor consortium estimates TransCanada’s oil conversion plan will rub out more than 1 Bcf/d of gas delivery capacity. The proposal for a substitute new Eastern Mainline would replace less than half the loss, ANE predicts.
In the “tainted” consultations on the pipeline overhaul, ANE says, “TransCanada went so far as to claim that the potential Energy East project and its prospective oil shippers had a greater right to the existing gas assets in the EOT than do existing gas shippers.”
ANE says TransCanada revealed its motive in a June 2013 letter to gas distribution companies. As cited in the new protest filed with the NEB, the document said: “The proposal to transfer some of the Mainline facilities to oil service essentially has brought forward a long term, long haul market that can recover TransCanada's long-term investment. Given the choice of gas customers to contract only for minimal periods, the oil service market is clearly the highest-value market for these assets.”