Western Canadian natural gas will keep a price gain this year that a pipeline delivery rule change achieved last fall, the top producer province is predicting.

A new Alberta government budget forecasts a 21% improvement in the gas annual average for 2020 to C$1.70/GJ ($1.34/MMBtu) from C$1.40/GJ ($1.10/MMBtu) in 2019.

Credit for the gain goes to a rule change on TC Energy Corp.'s supply collection network, Nova Gas Transmission Ltd. (NGTL), which producers and the government persuaded the Canada Energy Regulator (CER) to approve last fall.

By granting priority to deliveries into storage, the new delivery rule lets shippers drain surpluses off NGTL during seasonal gas demand lows and pipeline capacity interruptions for maintenance and construction.

The change ended a traffic jam of supply surpluses that severely depressed a Canadian gas market benchmark: the Alberta Reference Price (ARP), a monthly weighted average of production for all destinations that guides provincial royalty collections.

The ARP stagnated at C$0.55-$0.87/GJ ($0.43-$0.68/MMBtu) last June through September. The price jumped to C$1.63/GJ ($1.28/MMBtu) as NGTL traffic changed last October and has since risen above C$2.00/GJ ($1.58/MMBtu).

The NGTL tariff amendment expires next year. Pipeline expansion is expected to prevent price-depressing traffic jams after 2020. The CER has approved a C$2.3-billion ($1.7-billion) NGTL capacity addition project scheduled for completion in 2021.

"Expanding pipeline export capacity and higher demand from the industrial sector and oil sands producers will support natural gas prices," predicts the 2020-21 provincial budget presented by Alberta Finance Minister Travis Toews.

But he only expects modest further increases. His budget forecasts the western Canadian gas price will take until 2022 to reach C$2.10/GJ ($1.65/MMBtu) due to surpluses in Alberta and British Columbia as well as the United States.