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BC Endorses TransCanada’s Mainline Toll Cut to Revive Natural Gas Sales

British Columbia (BC) provincial officials have stepped forward to support TransCanada Corp.’s offer to revive Western Canada natural gas sales to Ontario, Quebec and the northeastern United States with a toll cut on its cross-country Mainline.

The move would benefit Western Canadian Sedimentary Basin (WCSB) operators, which produce the overwhelming bulk of the country’s natural gas.

“The evidence shows a clear need for a competitive tolling offering that would enable WCSB producers to preserve and reclaim eastern market share,” said the BC gas development ministry.

“Further, without such an offering, natural gas production in the WCSB is likely to fall,” the ministry added in a submission to the National Energy Board (NEB), with the clock ticking on TransCanada’s request for approval to make the toll cut Nov. 1.

The Alberta government likewise shows keen interest in the proposed 46% toll cut to C77 cents/gigajoule (61 cents/MMBtu) for Mainline deliveries to the Dawn storage and trading hub in southern Ontario.

Alberta’s energy department, while withholding a final verdict until all details are known, has told the NEB that it “views all market access pipelines as important to the continued economic viability of natural gas producers” in the WCSB.

Canada’s biggest distributors -- Union Gas in southern Ontario and Enbridge Gas in the Toronto region -- lengthened an NEB expedited review by peppering TransCanada with questions about cost effects on the rest of the Mainline service structure.

However, the NEB predicted a decision still may be made in time to hit the fall target for the sales revival -- and Dawn stands ready to play a growing role.

The site, 300 kilometers (188 miles) southwest of Toronto, is humming with construction activity with a capacity addition by Union, a subsidiary of Calgary-based Enbridge Inc. since its 2016 purchase of Spectra Energy.

In the past three years Union has poured C$1.5 billion ($1.1 billion) into expansions. Counting parallel additions to TransCanada’s eastern network, C$3.4 billion ($2.6 billion) has been invested since 2014 in raising total Ontario gas delivery capacity by 19% to 7.5 Bcf/d.

At Union headquarters near Dawn in Chatham, capacity sales manager Libby Passmore and associate Lydia Gazidis offer a portfolio of services to marketers in Canada and the United States.

The Union system features 16 connections with U.S. and Canadian gas pipelines that count 9.9 million customers in Ontario, Quebec and the northeastern United States. The new additions raise further possibilities for extending Canadian gas merchants’ reach into Michigan, say the service providers.

Dawn has used depleted gas fields for underground storage since 1942. The hub boasts direct connections with the Mainline, MichCon, Vector, Panhandle Eastern, Bluewater, Parkway, Kirkwall and Enbridge systems. Indirect connections are available with ANR, National Fuel, Empire, Dominion, Tennessee Gas, Iroquois, Portland Natural Gas Transmission and Great Lakes Gas Transmission.

In the Calgary capital of the supply side on the cross-continent gas market, a 23-company Who’s Who of exploration and production companies active in Alberta and BC has signed 10-year contracts to use 1.4 Bcf/d of the proposed bargain service.

“Alberta will be directly impacted,” said Alberta’s energy department in its intervention in the NEB proceeding. The stakes are bigger than the producers’ balance sheets, the government reminded the board.

“Alberta is responsible for the stewardship of significant Crown energy resources including the administration of royalties,” it said. “In 2016, approximately 63% of Alberta’s marketable natural gas production was exported beyond Alberta’s borders to supply demand markets, including traditional eastern Canadian markets.”

From an Alberta public interest point of view, reviving eastern gas sales lost to low-cost U.S. shale production, particularly from the Appalachian Basin, matters as much as the provincial crusade to triple oilsands exports to 890,000 b/d on Trans Mountain Pipeline from Edmonton to Vancouver.

Gas, not oil, freed the Alberta government from a 1980s and 1990s episode of budget deficits and debt that prompted sorely remembered service and job cuts. Gas royalties ended the pain by totaling C$52 billion ($39 billion) in 2000-2008 as Alberta’s top source of government revenue.

The gas bonanza has shriveled since by dropping 94% off its peak annual performance of C$8.3 billion ($6.2 billion) in 2005 to C$455 million ($341 million) predicted by the current provincial budget.

From BC’s viewpoint, TransCanada’s bargain cross-country delivery service would be a growth path for emerging northern shale production, led by the Montney formation of gas-rich liquid byproducts.

The BC province’s gas development ministry told the NEB, “The proposed service would afford WCSB producers an enhanced ability to compete with American producers in the eastern markets. This would in turn not only maintain, but also boost natural gas production in the WCSB.”

ISSN © 2577-9877 | ISSN © 1532-1231

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