The Canadian race to Asia with liquefied natural gas (LNG) has run into a hurdle at the starting gate: British Columbia consumers.

FortisBC Energy Inc., which distributes 95% of the gas used in BC, is asking the National Energy Board (NEB) to examine effects of the export campaign on the home market. The request arises from a cornerstone of a C$12.6 billion (US$11.3 billion) pipeline network that TransCanada Corp. plans to build from northern shale gas fields to LNG export terminals planned on the Pacific Coast of BC.

The new gas freeways threaten to hike transportation costs and gas prices for consumers in BC and the Pacific Western region of the United States who rely on the old routes built by Westcoast Energy (Spectra), FortisBC said.

The distributor says the danger shows in the North Montney Project, a C$1.7 billion (US$1.5 billion) proposal by TransCanada subsidiary Nova Gas Transmission Ltd. for a new line to collect to 2.9 Bcf/d of shale production.

Most of the project’s delivery capacity is booked by Progress Energy, the Canadian arm of Malaysia’s state-owned Petronas conglomerate and sponsor of the Pacific NorthWest LNG terminal proposed for a northern BC site at Prince Rupert.

In TransCanada’s grand design, the North Montney Shale gas would flow to the Petronas-Progress export terminal via a longer and larger new route called Prince Rupert Gas Transmission, across BC to the Pacific Coast from the shale production region.

From FortisBC’s viewpoint, the NEB review currently under way of the North Montney construction application is a test case in how BC gas traffic patterns, pipeline tolls, commodity prices and consumer costs will evolve if LNG projects succeed.

North Montney is being proposed as officially an extension of the Nova gas network in Alberta. As a result the project’s cost would be rolled-in with the finances of a 60-year-old grid, with no separate user-pay tolls charged for the new BC service.

FortisBC suggests that the TransCanada approach is bound to divert traffic off BC’s Westcoast (Spectra) network, creating excess capacity that inflates tolls and igniting upward pressure on commodity prices by tightening supplies.

The BC distributor points out that the Nova financial and toll structure evolved under provincial regulation, as a way to relay gas from all Alberta production fields, regardless of location, for a standard cost to long-distance pipelines to central Canada and the United States.

The BC system’s evolution followed a different pattern. The Westcoast (Spectra) network was always under NEB jurisdiction, included gas processing plants, and served home consumers while exporting leftover supplies to the U.S.

The NEB enabled a competitive pipeline market to develop in BC during the 1990s, with new projects and producers negotiating tolls separately for additions to the network. Nova only entered BC after the Alberta government agreed six years ago to a TransCanada request for a jurisdictional transfer to the NEB, as a way to enable the grid’s expansion across the western provinces.

FortisBC says the result is a “unique toll methodology” which, if allowed to continue on BC extensions of the Nova network, “will give TransCanada a significant and unfair competitive advantage over the existing pipelines that provide service in the region and any other party that may propose to build new gas pipeline facilities.”

FortisBC (FEI) predicts that letting TransCanada-Nova keep their Alberta advantage would undermine the BC home market. “It will impact FEI’s ability to continue to access natural gas supply for its customers at fair market prices, reduce the liquidity [at BC’s main storage and trading hub] and increase FEI’s cost of holding firm transportation capacity and storage resources to meet the requirements of its natural gas customers in British Columbia.”

FortisBC is requesting that the NEB should either hold a separate, full-dress special hearing on Nova tolling practices, or convene an inquiry into creating a suitable regime for all BC gas transporters.

“The objective . . . should be a toll methodology that recognizes and is developed for the circumstances that exist in BC, including the competitive environment and the potential for major new LNG-related gas transportation facilities,” FortisBC says.

The North Montney project review continues. TransCanada-Nova and the BC government have not yet responded to the gas distributor. The request to the NEB poses a dilemma to the provincial Liberal government, which has to date been a foremost promoter of LNG projects and relied on forecasts of shale gas surpluses to reassure consumers that rapid growth of high-volume exports will not drive up prices.