Nova Corp. last week withdrew its opposition to a pipelinebypass project mounted by Alberta Energy Co., but now the Albertagovernment refuses to be prodded into changing by the Canadiannatural gas community’s April agreement on allowing competition.

Nova did not come around easily. In a letter to the NEB, Novafacilities approval manager Rick Geddes repeated his firm’s dimview of AEC Suffield Gas Pipeline. This 70-mile, C$22.8 million(US$16.5 million), 175 MMcf/d route from southeastern Albertaacross the Saskatchewan boundary to a link with TransCanadaPipeLines at Burstall spells “unnecessary duplication of existingfacilities and the underutilization of NGTL pipelineinfrastructure.” Nova only stopped fighting because the April gaspact included a commitment to seek settlements of conflicts.

Geddes wrote, “The signatories” – including Nova and TransCanadaas well as the Canadian Association of Petroleum Producers andSmall Explorers and Producers Association of Canada – “recognizethat commercially negotiated solutions are to be preferred toadversarial proceedings as a means to address such issues as thosewhich arise from the duplication and offloading of existingpipeline infrastructure.” As a result, “NGTL’s and AEC Suffield’sefforts would be better spent attempting to reach a commercialsolution to the issues arising from the proposed project outside ofthe hearing process.”

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

The Alberta Department of Energy, however, is after bigger gamethan a toll bargain. Its role in the AEC case continues a longhistory of zealously guarding the province’s authority as well asrevenues owed to its ownership of natural resources under a 1930amendment to the Canadian constitution.

The provincial government’s lawyers insisted the pipelineproposal belongs under the jurisdiction of the Alberta Energy andUtilities Board. A formal motion demanded that the NEB eitherdismiss AEC’s construction application or refer the jurisdictionalquestion to the Federal Court of Canada.

The province said testimony at NEB hearings showed the projectonly pretends to be one that comes under federal authority. Thebypass route around Nova’s Alberta grid does not have to cross theSaskatchewan boundary – and only does because the sponsors fearedthat the EUB would delay or reject it, the provincial energydepartment said. “The AEC Suffield pipeline project constitutes anattempt to evade provincial jurisdiction. Where a provincialundertaking masquerades as a federal undertaking, such a subterfugewill not avail,” the Alberta lawyers said, citing a variety ofcourt precedents stretching back to the 1950s.

The province is anything but sure of victory. The AEC case wasthe second time this year the Alberta government tried to protectits jurisdiction over gas produced in the province and Nova’s40-year-old role as undisputed master of transporting it. Theenergy department lost the first round in a similar case involvinga smaller project by Northstar Energy Corp. to take southwesternAlberta gas output into southeastern British Columbia.

The NEB rejected Alberta claims to have the final say in lateApril, then approved Northstar’s C$6.4 million (US$4.6 million)Coleman Pipeline just before the hearings on the AEC project. Thefive-mile Coleman line only goes 30 feet into B.C. to connect withTransCanada’s Alberta Natural Gas, the Canadian inlet to thePacific Gas Transmission route to the northwestern United Statesand California. The Alberta government maintained the Colemanproject only included a border crossing to duck provincialauthority. But the NEB ruled that a physical “work,” as opposed toa general business “undertaking,” automatically becomes a federalmatter as soon as it crosses a boundary. The board said Alberta’slegal staff failed to unearth any legal precedents identifying”non-legitimate” reasons for provincial boundary crossings.

The NEB also rejected industry critics of Northstar – includingNova – to send a message that the end is at hand for corporateprivileges and exclusive franchises in the Canadian gas community.The federal board noted Northstar’s line will be in competitionwith Nova, and called that the thin edge of a wedge of good.

“It cannot be expected that the whole gas transmission industrywill become competitive and efficient with one regulatorydecision,” the NEB said. “However, each step towards a morecompetitive market will yield incremental gains that arebeneficial. The immediate effect of this decision will be theavailability of lower transportation costs for Northstar and otherpotential shippers from the southern Foothills area. In the longerterm, this decision may help market signals flow to the providersof pipeline transportation, and their regulators to result inbetter system planning choices.”

The NEB, perhaps anticipating the gas accord, added: “Ingeneral, the public interest is served by allowing competitiveforces to work except where there are costs that outweigh thosebenefits. An important element of competition and market-basedsolutions.is the extent to which producers can exercise the choiceto have access to alternative means of getting their products tomarket.”

Gordon Jaremko, Calgary

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