Petro-Canada Plans Bypass to Skirt Tolls
Petro-Canada has become the latest natural gas producer to resort to a pipeline bypass to cut costs of transportation on the TransCanada-Nova system by ducking around its former monopoly franchise in Alberta.
Petro-Canada filed with the National Energy Board for a 40-mile, 53 MMcf/d link between prolific gas fields in the Medicine Hat area of southeastern Alberta to the TransCanada long-distance mainline in southwestern Saskatchewan. The plan calls for the connection, titled Medicine Hat Pipeline, to be built and in operation by May 1, 2002, for a cost of C$9.9 million (US$6.6 million), with Petro-Canada using 55% of the capacity while the rest is booked by four other producers.
Petro-Canada made no disclosures of tolls and said they will be negotiated on a commercial basis, without resorting to cost-of-service methods and regulatory policing. The last producer that adopted the bypass technique in the same region -- Alberta Energy Co., with a 190 MMcf/d line -- estimated transportation cost savings were at least 50%.
The tactic emerged among producers in the mid-1990s as tolls rose on the Nova Alberta grid to pay for expansions in the northern part of the province, while the NEB adopted a policy of encouraging a competitive market for pipeline services. The producer bypass emerged as a standard approach in regions near provincial boundaries. A border crossing automatically gives jurisdiction over a project to the NEB as opposed to the Alberta Energy and Utilities Board, which traditionally defended the Nova franchise for decades before TransCanada acquired it in a 1999 merger.
Bypasses -- including the biggest one of them all, Alliance Pipeline from northern British Columbia to Chicago - are key factors driving a contested TransCanada application for rate-of-return and toll increases now before the NEB.
©Copyright 2001 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.