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 & 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&NP'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&NP'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&NP 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&P's
tolls reflect its true costs of delivering gas. An MN&P 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&P. 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&P proved there is an
"enduring market" by landing 20-year transportation contracts with
industrial customers for Point Tupper, it has "significant
concerns" with MN&P'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&P 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&P 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&P's scheduled in-service
date of Nov. 1 this year.
Gordon Jaremko, Calgary
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