Round one of a developing battle over Canada’s last virginmarket for natural gas has been won by the first entry, even beforeothers have a chance to set up shop. The National Energy Boardauthorized Maritimes &amp Northeast Pipeline to serve the firstindustrial customers in Nova Scotia, with a branch line thatbypasses prospective local distributors.

In approving the first in a series of six laterals on M&ampNP’sdrawing boards, the NEB served notice it wants no part of acatfight for distribution franchises on Canada’s East Coast. Therivalry spilled over into the case of M&ampNP’s Point TupperLateral because its shippers include gypsum wallboard manufacturerCGC Inc. and a pulp and paper operation, Stora Port Hawkesbury Ltd. SaskEnergy International Inc., a former contender for adistribution franchise, accused M&ampNP of “cherry-picking” thebest Canadian markets for gas to be produced by the Sable OffshoreEnergy Project. SaskEnergy urged the NEB to make sure MN&ampP’stolls reflect its true costs of delivering gas. An MN&ampP lateralspolicy, accepted by the NEB’s earlier approval of the maritime gasproject, sets a C60-cent (US40-cent) rate. The NEB said underCanada’s federal-provincial divisions of jurisdiction, it would be”inappropriate” for a national board to lay down a policy on theeffects of long-distance pipeline practices on local distributors.”The development of natural gas markets in the province, and howgas is bought and sold, is a matter of local interest that is mostappropriately left for the province to determine.” The Nova Scotiagovernment has enacted a distribution policy and competition forfranchises is under way.

The NEB also made it plain there is no clear answer yet to a keyquestion hanging over MN&ampP. To what extent will it become adomestic transporter for Canada’s Atlantic provinces, the last partof the country with no gas service, rather than serve its originalmandate to be primarily an export route to the northeastern UnitedStates? The NEB said that while MN&ampP proved there is an”enduring market” by landing 20-year transportation contracts withindustrial customers for Point Tupper, it has “significantconcerns” with MN&ampP’s forecasts of eastern Canadian markets. Theproject’s blueprint for laterals foresees a growing grid spanningNew Brunswick and Prince Edward Island as well as Nova Scotia.

In the Cape Breton and northern Nova Scotia region to be servedby the first domestic lateral line, Point Tupper, “MN&ampP has notperformed an assessment of the feasibility of the transmission anddistribution systems that will be required for such markets tomaterialize,” the NEB said. In general, “until the awarding ofnatural gas distribution franchises in Nova Scotia and thedistribution systems are constructed, the timing and the extent ofthe future development of these markets remain uncertain.”

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

Participants in the Atlantic Canadian gas project are notrelying on domestic markets to materialize early. A new filing foran export permit for the NEB shows that SOEP partner Imperial OilResources has landed an eight-year sale of 42 MMcf/d to Boston GasCo., with deliveries to start on MN&ampP’s scheduled in-servicedate of Nov. 1 this year.

Gordon Jaremko, Calgary

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