Unconventional producers in northern British Columbia (BC) are facing premium pipeline tolls to connect their wells to TransCanada Corp.’s western supply collection grid, Nova Gas Transmission Ltd. (NGTL).
The new NGTL rate package sets a surcharge of 10 cents/Mcf on the North Montney Mainline (NMML) underway across 305 kilometers (183 miles) of BC for C$1.6 billion ($1.2 billion).
NGTL has asked the National Energy Board (NEB) to approve the plan by June, in time to collect the surcharge when NMML construction is finished and the line starts to flow 1.4 Bcf/d of natural gas in September from the Montney formation.
The surcharge would cover 73% of the new line’s cost, according to the NGTL rate application. The remainder would go into rolled-in rates paid by all shippers using the 25,500-kilometer (15,500-mile) NGTL pipeline network in Alberta and elsewhere in BC.
The NMML only has 11 shippers. However, their additions to NGTL’s flows would help all customers by spreading costs thinner over higher total traffic, the rate application stated.
NGTL projected annual benefits of C$62-70 million ($46-52 million). The growth region served by the NMML has an estimated 85 Tcf of reserves.
Extending the grid into the BC region by building the NMML across the industry frontier west of the Canadian leg in the Alaska Highway is a natural and necessary addition to supplies, according to NGTL’s application.
Gas supply has depleted and has to be replaced at an annual rate of 2.4 Bcf/d in aging production areas served by the established grid, NGTL said. “Connecting the prolific North Montney supply area to the NGTL system will ensure that the Western Canada Sedimentary Basin is able to compete successfully.”
The NMML toll surcharge grew out of industry and government concerns, echoed by the NEB’s construction approval, that only charging the unconventional gas pioneers the same rates as the rest of the NGTL system would be “cross-subsidization” of a BC minority.