East Tennessee Natural Gas, a unit of Houston-based El PasoEnergy, is holding an open season for incremental capacity alongits mainline in Tennessee and Virginia. The proposed expansionwould entail construction of mainline pipeline, compression andrelated facilities. Service is targeted to begin Nov. 1, 2000.

Since 1996, El Paso has added more than 75,000 Dth/d of capacityto East Tennessee, an increase of more than 10%. All the expansionsreceived rolled-in rate treatment, said Bryan Neskora, manager ofbusiness development for El Paso.

“The existing customers are growing. East Tennessee is really asubset of the whole Southeast, which is just growing by leaps andbounds with a lot of industrial growth in the area,” Neskora said.East Tennessee is in the middle of a project right now. Called theVirginia expansion, the first phase in Virginia has been completed.Work in Tennessee will take place this summer with completionexpected by November. “That’s a fairly small expansion. It’s alittle over 10,000 Dth/d. That’s a combination of shippers inTennessee and Virginia.”

This new project will allow shippers to access supply from theNorthern Border and Alliance Pipeline projects as well as the GulfCoast and Texas.

The size of the expansion will be determined by the results ofthe open season, which closes at the end of April. Interestedparties should send a written request for service to Neskora at ElPaso Energy, P.O. Box 2511, Houston, TX 77252, Fax: (713) 420-2369,no later than 5 PM CST, April 30. For questions call Neskora at(713) 420-2655, or Bill Wickman at (423) 694-1677. Joe Fisher,Houston

CAPP, Nova Agree to Distance-Based Tolls With Discounts

A lingering sore spot has been healed in the Canadian naturalgas community by a deal between producers and TransCanada PipeLinesLtd. for new tolls on the 80% of the nation’s gas output thattravels on the Nova grid in Alberta.

The agreement cures the original irritant, replacing uniform,”postage-stamp” tolls with distance-based charges, but softens theblow. Northern producers earn savings to the extent that they shiphigh volumes to spread thin the costs of pipeline facilities. Thereare also savings for long-term contracts.

Under the old regime, created by the Alberta government in 1980as an incentive to develop gas no matter where it is found,TransCanada reported the postage-stamp toll would be C27.7 cents(US18.5 cents) per Mcf this year. In the new system, charges willrange from C19.9 cents to 35.9 cents (US13.3-24 cents) forshipments bound for out-of-province destinations via Novaconnections with long distance pipelines.

Rates for each producer will vary depending on the diameter ofpipe they require, as well as the distance between their receiptpoints on the Nova system and the delivery destinations. In theory,reasonably large Canadian producers with portfolios of productionrather than single sources could come out even or even save moneybecause reduced rates for southern fields will offset increases fornorthern output. In addition to earning savings with highproduction volumes, shippers can obtain 5% discounts for committingto five-year transportation contracts. Shippers that only take onone-year commitments will pay 5% penalties, while three-yearcontracts carry the standard rates.

The new system also continues discounted “load retention rates”that Nova began offering before its takeover by TransCanada,chiefly to PanCanadian Petroleum Ltd. in exchange for its agreementto abandon a major bypass project called Palliser in southernAlberta. The load-retention deal was the trigger that set offabout two years of wrangling and negotiation which culminated inthe new agreement. The deal was not reached easily. Besidesigniting hostility towards Nova, the Palliser affair badly dividedproducers because many in Canada make specialties of regions.

PanCanadian, for instance, as heir to 19th-Century land andminerals grants associated with construction of the CanadianPacific Railway, has been nicknamed “the sleeping giant” because ofits ability to ramp up production almost overnight on its wealth ofsouthern Alberta properties. Palliser was designed as analternative to postage-stamp Nova rates that included costs oflong-distance shipping, with savings of about 40% projected. On theother side stood major producers like Anderson Exploration, whichis built on prolific but distant gas fields in the Peace Riverregion of northwestern Alberta and northeastern British Columbia.

The new agreement was only possible because of its discounts forhigh-volume shipping and long-term service contracts, which tookmonths to negotiate, plus another concession. To close the deal,TransCanada committed to pay 25% of the retention rate’s costrather than try to collect the whole amount by spreading the billsaround all shippers’ tolls.

The new system avoids increases in the Nova system’s overallrevenue requirements. There will also be a five-year transitionperiod for phasing in the new tolls, with costs covered bycontributions of C$25 million (US$16.7 million) from TransCanadaand C$20 million (US$13.3 million) from shippers out of an accountcreated for savings by an earlier incentive-tolling agreement onsplitting gains from efficiency improvements.

An application to enact the deal, currently a memorandum ofunderstanding between TransCanada and the Canadian Association ofPetroleum Producers, will be filed within weeks at the AlbertaEnergy and Utilities Board.

Gordon Jaremko, Calgary

©Copyright 1999 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.