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Northwest Territories Supports Nova Pipeline Grid Federal Supervision

TransCanada Corp. will blaze a new trail toward economic development of northern natural gas in affordable stages by transferring the Nova pipeline grid in Alberta over to federal supervision, the National Energy Board (NEB) has been told.

The Northwest Territories government raises the possibility of alternatives to the stalled Mackenzie Gas Project in a filing that throws enthusiastic support behind TransCanada's application to the NEB for the historic switch of Nova to federal from provincial jurisdiction.

The government in Yellowknife describes itself as "keenly aware of and vitally interested in the use that gas from north of the 60th parallel will one day make of the Alberta system." The NEB does not have to wait for any particular Nova extension project to trigger a jurisdictional transfer declaration because TransCanada already has fully integrated the Alberta grid into its federally regulated national and international transmission system, the northern authorities added.

The territorial government repeats a case it has been making since early 1999 -- before the Mackenzie proposal revived a dormant 1970s gas megaproject -- for the NEB to take over supervision of the TransCanada-Nova network as a single delivery service. Northern leaders formally requested the switch immediately following TransCanada's takeover of formerly independent Nova Corp. in 1998.

At that time, as now, the territorial government emphasized "the extent of and economic benefit from natural gas development in the Northwest Territories will be dependent upon the adequacy of -- and cost of using -- the transportation system." Key issues included "the producer economics associated with the development of new reserves in the Northwest Territories."

The original appeal for the jurisdictional transfer was suspended by agreement of all concerned soon after it was made, when Imperial Oil, Shell Canada, ConocoPhillips Canada and ExxonMobil Canada proposed the Mackenzie project.

But at that time, an economic lull -- when labor and materials costs for energy mega projects were at lows -- also fueled construction of new Alberta oil sands plants. Then the consortium forecast an economic price tag of about C$4 billion (US$3.5 billion) for production wells on the Mackenzie Delta and a 1,220 kilometer (762-mile) Mackenzie Valley pipeline to the 60th parallel. A regulatory agreement by the NEB and a dozen other federal and northern agencies with jurisdiction over elements of the jumbo scheme forecast that an efficient approval process could take as little as three years.

Nine years later, the Mackenzie project remains in limbo. Construction cost estimates have quadrupled to about C$16 billion (US$14 billion). Forecasts of processing fees and shipping tolls to get Delta gas as far as the 60th parallel territorial boundary with Alberta exceed current gas prices and market projections. The regulatory process is hung up, awaiting a report promised for some as yet unspecified time in 2009 from an environmental joint review panel of federal, territorial and aboriginal authorities.

Even that report will not end the process. The NEB is allowing itself and all concerned about four months to digest the panel results before holding a final argument stage of the northern hearings marathon. The established TransCanada-Nova pipeline system stands out as a sharp contrast to the Mackenzie project's attempt to connect the entire Northwest Territories to gas markets all in one mammoth gulp. The Alberta network is a readily expandable system with a 54-year record of growth by installing economic additions tailored to match requirements of the times. The 23,500-kilometer (14,700-mile) Nova grid spanning Alberta reaches to within about 100 kilometers (62 miles) of the territorial boundary. An application has been filed for an extension north to the 60th parallel.

That extension was crafted as the southern-most leg of the proposed Mackenzie Valley pipeline, but nowhere is it written in stone that such a new pipe would only be built to carry an Arctic vintage of gas originating on the Mackenzie Delta. Producers such as MGM Energy, Paramount Resources and Husky Energy own discoveries and continue to explore for reserves in geology rated as highly prospective much farther south in the central Mackenzie Valley region. Industry participants have periodically disclosed that there have been discussions of economic alternatives to the mammoth Arctic project.

The Nova system, a legacy of the modern Canadian industry's early-1950s dawn, operates under a provincial legislative charter that prohibits extensions outside Alberta across Canadian or international boundaries. Tolls are also separately regulated, under a provincial policy that a decade ago set aside a tradition of postage stamp or single-price service and injected an element of distance-based charges which can favor gas originating within Alberta over deliveries starting elsewhere and crossing the province into long-distance systems. The territorial government says Canada's gas delivery regulatory structure should, like its post-1990s corporate ownership, be fair and efficient by following policies that recognize industry and geological realities. Northern gas is part of the same WCSB that Nova was originally developed to serve in the Alberta heartland where production began, say the authorities in Yellowknife.

"Natural gas reserves in the southern WCSB [Western Canadian Sedimentary Basin] available to the Alberta and TransCanada systems are declining and are being supplemented by increased exploration and development in northern Alberta British Columbia and the Northwest Territories," the territorial government points out. "Extension of the Alberta system into the Northwest Territories is one of the available means to extend the delivery system for WCSB gas."

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