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NEB Gives Maritimes Bypass Rights

NEB Gives Maritimes Bypass Rights

Round one of a developing battle over Canada's last virgin market for natural gas has been won by the first entry, even before others have a chance to set up shop. The National Energy Board authorized Maritimes &amp Northeast Pipeline to serve the first industrial customers in Nova Scotia, with a branch line that bypasses prospective local distributors.

In approving the first in a series of six laterals on M&ampNP's drawing boards, the NEB served notice it wants no part of a catfight for distribution franchises on Canada's East Coast. The rivalry spilled over into the case of M&ampNP's Point Tupper Lateral because its shippers include gypsum wallboard manufacturer CGC Inc. and a pulp and paper operation, Stora Port Hawkesbury Ltd. SaskEnergy International Inc., a former contender for a distribution franchise, accused M&ampNP of "cherry-picking" the best Canadian markets for gas to be produced by the Sable Offshore Energy Project. SaskEnergy urged the NEB to make sure MN&ampP's tolls reflect its true costs of delivering gas. An MN&ampP laterals policy, accepted by the NEB's earlier approval of the maritime gas project, sets a C60-cent (US40-cent) rate. The NEB said under Canada's federal-provincial divisions of jurisdiction, it would be "inappropriate" for a national board to lay down a policy on the effects of long-distance pipeline practices on local distributors. "The development of natural gas markets in the province, and how gas is bought and sold, is a matter of local interest that is most appropriately left for the province to determine." The Nova Scotia government has enacted a distribution policy and competition for franchises is under way.

The NEB also made it plain there is no clear answer yet to a key question hanging over MN&ampP. To what extent will it become a domestic transporter for Canada's Atlantic provinces, the last part of the country with no gas service, rather than serve its original mandate to be primarily an export route to the northeastern United States? The NEB said that while MN&ampP proved there is an "enduring market" by landing 20-year transportation contracts with industrial customers for Point Tupper, it has "significant concerns" with MN&ampP's forecasts of eastern Canadian markets. The project's blueprint for laterals foresees a growing grid spanning New Brunswick and Prince Edward Island as well as Nova Scotia.

In the Cape Breton and northern Nova Scotia region to be served by the first domestic lateral line, Point Tupper, "MN&ampP has not performed an assessment of the feasibility of the transmission and distribution systems that will be required for such markets to materialize," the NEB said. In general, "until the awarding of natural gas distribution franchises in Nova Scotia and the distribution systems are constructed, the timing and the extent of the future development of these markets remain uncertain."

MN&ampP has forecast that by the fifth year after it starts deliveries in 1999, Atlantic Canadian gas demand will reach 340,000 MMBtu/d. The region's potential is rated at 475,000 MMBtu/d, or virtually the entire initial capacity of the pipeline.

Participants in the Atlantic Canadian gas project are not relying on domestic markets to materialize early. A new filing for an export permit for the NEB shows that SOEP partner Imperial Oil Resources has landed an eight-year sale of 42 MMcf/d to Boston Gas Co., with deliveries to start on MN&ampP's scheduled in-service date of Nov. 1 this year.

Gordon Jaremko, Calgary

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ISSN © 2577-9877 | ISSN © 1532-1266
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