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Jurisdictional Battle Continues Between Alberta and the NEB

Jurisdictional Battle Continues Between Alberta and the NEB

Nova Corp. last week withdrew its opposition to a pipeline bypass project mounted by Alberta Energy Co., but now the Alberta government refuses to be prodded into changing by the Canadian natural gas community's April agreement on allowing competition.

Nova did not come around easily. In a letter to the NEB, Nova facilities approval manager Rick Geddes repeated his firm's dim view of AEC Suffield Gas Pipeline. This 70-mile, C$22.8 million (US$16.5 million), 175 MMcf/d route from southeastern Alberta across the Saskatchewan boundary to a link with TransCanada PipeLines at Burstall spells "unnecessary duplication of existing facilities and the underutilization of NGTL pipeline infrastructure." Nova only stopped fighting because the April gas pact included a commitment to seek settlements of conflicts.

Geddes wrote, "The signatories" - including Nova and TransCanada as well as the Canadian Association of Petroleum Producers and Small Explorers and Producers Association of Canada - "recognize that commercially negotiated solutions are to be preferred to adversarial proceedings as a means to address such issues as those which arise from the duplication and offloading of existing pipeline infrastructure." As a result, "NGTL's and AEC Suffield's efforts would be better spent attempting to reach a commercial solution to the issues arising from the proposed project outside of the hearing process."

No quick or easy settlement was reported to the NEB. The rivals were far apart on tolls for moving gas out of prolific fields on the Suffield Military Range. The NEB was told that AEC Suffield's tolls would save shippers C$3.75 million (US$2.7 million) per year compared even to new, distance-based rates that Nova proposed to the earlier this spring and remain under negotiation.

The Alberta Department of Energy, however, is after bigger game than a toll bargain. Its role in the AEC case continues a long history of zealously guarding the province's authority as well as revenues owed to its ownership of natural resources under a 1930 amendment to the Canadian constitution.

The provincial government's lawyers insisted the pipeline proposal belongs under the jurisdiction of the Alberta Energy and Utilities Board. A formal motion demanded that the NEB either dismiss AEC's construction application or refer the jurisdictional question to the Federal Court of Canada.

The province said testimony at NEB hearings showed the project only pretends to be one that comes under federal authority. The bypass route around Nova's Alberta grid does not have to cross the Saskatchewan boundary - and only does because the sponsors feared that the EUB would delay or reject it, the provincial energy department said. "The AEC Suffield pipeline project constitutes an attempt to evade provincial jurisdiction. Where a provincial undertaking masquerades as a federal undertaking, such a subterfuge will not avail," the Alberta lawyers said, citing a variety of court precedents stretching back to the 1950s.

The province is anything but sure of victory. The AEC case was the second time this year the Alberta government tried to protect its jurisdiction over gas produced in the province and Nova's 40-year-old role as undisputed master of transporting it. The energy department lost the first round in a similar case involving a smaller project by Northstar Energy Corp. to take southwestern Alberta gas output into southeastern British Columbia.

The NEB rejected Alberta claims to have the final say in late April, then approved Northstar's C$6.4 million (US$4.6 million) Coleman Pipeline just before the hearings on the AEC project. The five-mile Coleman line only goes 30 feet into B.C. to connect with TransCanada's Alberta Natural Gas, the Canadian inlet to the Pacific Gas Transmission route to the northwestern United States and California. The Alberta government maintained the Coleman project only included a border crossing to duck provincial authority. But the NEB ruled that a physical "work," as opposed to a general business "undertaking," automatically becomes a federal matter as soon as it crosses a boundary. The board said Alberta's legal staff failed to unearth any legal precedents identifying "non-legitimate" reasons for provincial boundary crossings.

The NEB also rejected industry critics of Northstar - including Nova - to send a message that the end is at hand for corporate privileges and exclusive franchises in the Canadian gas community. The federal board noted Northstar's line will be in competition with Nova, and called that the thin edge of a wedge of good.

"It cannot be expected that the whole gas transmission industry will become competitive and efficient with one regulatory decision," the NEB said. "However, each step towards a more competitive market will yield incremental gains that are beneficial. The immediate effect of this decision will be the availability of lower transportation costs for Northstar and other potential shippers from the southern Foothills area. In the longer term, this decision may help market signals flow to the providers of pipeline transportation, and their regulators to result in better system planning choices."

The NEB, perhaps anticipating the gas accord, added: "In general, the public interest is served by allowing competitive forces to work except where there are costs that outweigh those benefits. An important element of competition and market-based the extent to which producers can exercise the choice to have access to alternative means of getting their products to market."

Gordon Jaremko, Calgary

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