Swift approval is being sought for an application by TransCanada Corp. to transfer jurisdiction over Alberta’s gas-gathering pipeline web to the National Energy Board (NEB) before the province has time to change its mind about allowing the historic switch without putting up a fight.

“Address and resolve TransCanada’s application as expeditiously as reasonably possible,” BP Canada Energy President Randy McLeod urged in an open letter to the NEB, “to minimize the uncertainties” that the regulatory action “will inevitably raise.”

The proposal is no minor formality, McLeod emphasized. The Alberta grid, still operating as NOVA Gas Transmission Ltd. (NGTL) 10 years after TransCanada’s ownership takeover, “is among the most significant and strategic segments of the Canadian pipeline grid. Regulation of NGTL and its tolls and tariffs, and the regulatory policies applied to NGTL in the public interest, are consequential to all participants in the continental gas industry that produce, process, transport, transact, distribute or consume Canadian gas.”

The application came at a relatively quiet time for NOVA. But outstanding issues await resolution by the Alberta Utilities Commission under the old regulatory regime. Items range from a toll settlement with gas shippers to a C$1 billion-plus proposal for a new branch line from growing production fields in northwestern Alberta and northeastern British Columbia to the hot industrial demand growth area in the oil sands region around Fort McMurray in northeastern Alberta.

The proceedings “are significant to the development of the industry,” McLeod wote. “TransCanada’s application is fundamentally at odds with the continuance of those proceedings. This conflict creates a climate of great uncertainty regarding NGTL within the industry, uncertainty that can be expected to continue until the application is addressed and resolved by the board.”

The conflict is more apparent than real and rooted in legacies that all concerned are willing to let fade into history, TransCanada assured the NEB. “Extensive consultation…has not given rise to any expressed opposition to the application.” There have been thorough discussions “with governments, regulators and commercial third parties including stakeholders on the TransCanada Alberta System, the Canadian Association of Petroleum Producers and the Industrial Gas Consumers Association of Alberta.”

While the application does not include details of TransCanada’s pitch, the reasoning shows in the corporation’s current standard investor relations presentations. It can be summed up in a single word — “hub.” The term is repeatedly used by Alberta Energy Minister Mel Knight’s aides in explanations for the decision of the Conservative government in Edmonton to let go of the NOVA system after 54 years of keeping it under provincial jurisdiction as an instrument of economic policy chartered by the legislature.

The 23,500-kilometer (14,700-mile) NGTL network, originally known as Alberta Gas Trunk Line when it was launched with a share sale exclusively reserved for residents of the province, no longer primarily serves production growth, Knight’s office and TransCanada agree. The grid’s main purpose is evolving into service as a gigantic shipping and trading center for production that comes from a variety of northern and western jurisdictions and flows to markets across the continent on an array of long-distance pipelines.

The NGTL network currently carries more than 10 Bcf/d or nearly 70% of supplies from all western Canadian sources and 16% of total North American output. Alberta’s share of total production is declining at a rate of up to 3% per year as conventional wells naturally run down and unconventional sources such as coalbed methane or “tight” shale gas show no signs yet of making up for the erosion, agree forecasters including the provincial Energy Resources Conservation Board.

The newest potential big source of replacement production in the near future, shale gas drilling plays known as Montney and Horn River, are in the Fort St. John and Fort Nelson regions of northeastern British Columbia. The long-range lineup of potential new supplies includes arctic gas from the Mackenzie Delta and Alaska.

The hub strategy says NGTL needs to be under federal jurisdiction in order to respond swiftly as supplies evolve, in a manner coordinated with TransCanada’s long-distance mainline and subsidiary Foothills systems. Hub thinking also suggests that the TransCanada network needs ability to act quickly and clearly in a unified fashion under a single regulator in order to stay competitive with potential rivals such as Alliance Pipeline and possible producer-sponsored alternative routes for northern gas.

Space is forecast to open up for northern gas over the next 20 years due to rising Alberta industrial demand as well as the natural decline in the productivity of old fields. Consumption by thermal oil sands production and gas-fired power plants alone will by about 2015 take an additional 1.9 Bcf/d out of the long-distance pipelines and off the export market, TransCanada forecasts. By 2025 western Canadian exports are projected to slip to about 5 Bcf/d or well below half the 14 Bcf/d-plus design capacity of the TransCanada-Nova network and its peak deliveries of about 13 Bcf/d achieved about six years ago.

Ensuring that the NGTL grid stays competitive as a North American trading hub will serve a cornerstone of current Alberta economic policy that calls for maximum development of value-added products led by petrochemicals, TransCanada added at a recent industry conference.

TransCanada predicted that its system will have enough spare capacity by 2017 to take all planned Alaskan deliveries of 4.5 Bcf/d. Provided the traffic flows across NGTL instead of competing bypass pipelines, Alaskan gas is projected to provide a rich source of byproduct natural gas liquids as raw materials for Alberta petrochemical sites.

Supplies for existing plants and potential additions, chiefly ethane, are extracted by “straddle plants” on the Nova grid. A 4.5 Bcf/d stream of Prudhoe Bay production crossing the NGTL network would enable the straddle plants to recover up to 285,000 b/d of gas liquids, TransCanada estimates.

Ethane would dominate the stream of raw materials for Alberta industry at up to 152,000 b/d, but there would also be rich flows of propane, butane and gasoline-like condensate. Canadian arctic gas is dryer than Alaskan production but also has potential to provide about 28,000 b/d of liquid byproducts led by ethane, TransCanada adds.

The future of raw materials supplies for current and potential future petrochemical plants is a hot topic in key parts of Alberta’s political geography — and not least in the Fort Saskatchewan region east of Edmonton, a hybrid area of industry and intensive agriculture from which Premier Ed Stelmach and other pillars of the Conservative regime come.

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