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Opposition to Gas Exports Growing in Canada

Opposition to Gas Exports Growing in Canada

After a lengthy absence, resistance is redeveloping in Canada to long-term commitments of significant Canadian gas supplies to markets in the United States.

The critics, while far short of a mass movement, are beginning a campaign at least to delay further expansion of the international gas trade. Conservation- and consumer-minded groups from Ontario, British Columbia, Saskatchewan and Alberta are calling on the National Energy Board to hold full-scale public hearings into the first application for new long-term export licenses since this year's escalation of prices and acceleration of development swung into high gear. The intervenors hope to give the NEB no choice but to scrap plans to hold a speedy, non-controversial "paper hearing" --- a document-exchange procedure that has worked in export license cases since the mid-1990s - on applications involving ProGas Ltd. and RDO Foods Co.

The industry and the board alike are moving carefully, recalling how a small but determined band of protesters held up major export licenses for about a year in the early 1990s with a successful appeal to Canadian courts that claimed rapid procedures denied intervenors rights to due process. By industry standards, the RDO deal is routine. ProGas seeks a license to sell the North Dakota-based food conglomerate 4.2 Bcf of gas over an eight-year period for a potato processing plant in its home town of Grand Forks. In another application also regarded as routine by current standards in the Canadian industry, ProGas seeks an eight-year extension of a blanket export license to serve multiple U.S. markets until 2008 and about a five-fold increase in the total volumes authorized to head south to 109 Bcf. The blanket license covers a part of the ProGas sales portfolio that travels by the Foothills-Northern Border route to Chicago.

Among the protesters stand the Citizens Oil and Gas Council - formerly Rocky Mountain Ecosystem Coalition, architect of the early-1990s court case - and a clutch of activists such as the Vancouver chapter in the Council of Canadians, Citizens Concerned About Free Trade, Albertans for a Wild Chinchaga, RAGE (Rainforest Action Group of Edmonton), the Castle-Crown Wilderness Coalition, the Edmonton chapter in the Canadian Parks and Wilderness Society, the Alberta Wilderness Association and the Speak Up For Wildlife Foundation (represented by a celebrated expert on bears, Brian Horejsi).

The protesters maintain that accelerating gas exports to the U.S. both drive proliferating industrial invasions of western Canada's last natural spaces along the foothills of the Rocky Mountains and make domestic gas consumers pay inflated prices. While drilling rigs are setting activity records in gas-prone regions of B.C., Alberta and Saskatchewan, Canadian distribution companies are in a series of cases before utility commissions, raising commodity rates to pass on prices that have increased into the C$5/Mcf (US$3.45). The new domestic prices, which have held up for much of this year, represent a five-fold increase compared to mid-1990s levels on glutted domestic markets that prevailed before the recent wave of international pipeline expansions.

Newly-released NEB figures confirm that Canadian exporters are having a banner year, barring any surprise successes by irritated consumers and environmentalists out to trip up the industry.

In the first half of the current gas-contract year, between last Nov. 1 and this April 30, the NEB data shows export volumes jumped 10.3% to 1.76 Tcf. Average prices at the border gained 32% to US$2.55 per MMBtu. The bottom line in first-half 1999-2000 was a 45% leap in Canadian gas export revenues to US$4.5 billion.

The greatest volume growth was in the northeastern U.S., where Canadian exporters increased sales by 23.8% to 484.5 Bcf in the first half of the 1999-00 contract year. The strongest improvement in prices was registered by exports to California, with the average fetched at the Canadian border climbing 36.3% to US$2.40 per MMBtu.

Long-term sales, under contracts lasting two years or more, account for only 28% of Canadian export sales compared to virtually 100% in the years preceding deregulation and free trade. Shorter deals involve much less elaborate procedures before the NEB because they are deemed not to represent large supply commitments. But big aggregators such as ProGas, which represents a supply pool of 186 producers and 2.6 Tcf of dedicated gas reserves, continue to maintain long-term export licenses in order to enhance the stability of their arrangements and keep open options of making lengthy sales contracts.

Gordon Jaremko, Calgary

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