Peace lasted less than two months in the Canadian natural gascommunity. Now comes the hard part of its April 8 agreement onpipeline regulation and competition – thrashing out what it meansin a contest over a small project with big implications.

Nova Gas Transmission and Alberta Energy Co. are tangling beforethe National Energy Board over how the agreement among Nova,TransCanada, the Canadian Association of Petroleum Producers andthe Small Explorers and Producers Association of Canada affects anew 70-mile pipeline proposed by Alberta Energy’s AEC Suffield GasPipeline.

The AEC Suffield project aims to bypass the Nova system with alink from the gas-rich Suffield Military Range in southeasternAlberta to a connection with TransCanada PipeLines across theSaskatchewan border. The boundary crossing puts jurisdiction in thehands of the NEB, not the Alberta Energy and Utilities Board, theprotector of Nova’s franchise.

Both sides in the feud insist they deserve to win under theApril accord. All sides pledged “to promote a competitiveenvironment and greater customer choice.” But the two are polesapart on what that means in practice.

In the jargon of the landmark agreement and the NEB case, thequarrel centers on the word “incremental.” The gas accordrecognized “the need to construct competitive incremental pipelinecapacity from the Western Canadian Sedimentary Basin by both newcompetitors and existing pipelines….” The question is whether the”incremental” refers to capacity for additional supply oradditional pipeline service.

In written submissions to the NEB, Nova says “it isapparent.that the gas AEC Suffield proposes to transport on itspipeline is gas that the NGTL system has been designed, approvedand constructed to transport.” Nova says it stands to lose shippingrevenues of $16.9 million per year, causing upward pressure on itstolls, because AEC’s initial capacity for 175 MMcf/d would befilled with gas that would otherwise run on the older pipeline.

Alberta Energy’s hired-gun representative in the case – MarkDrazen, a veteran specialist in pipeline competition from St.Louis, MO – does not deny that AEC confronts Nova with rival,duplicate facilities. Those are just what the market requires tomake old-line gas transporters adapt to the new era of competitionand cost-cutting, he tells the NEB. “Although NGTL facilities canphysically move the gas, NGTL provides a higher cost, less economicservice than AEC Suffield will provide.”

AEC Suffield, to be laid across easy prairie terrain for C$22.8million (US$16.5 million), proposes tolls ranging from C14.7 cents(US10.6 cents) per gigajoule for 20-year transportation contractsto C17.5 cents (US12.7 cents) for five-year subscriptions. When theproject was invented last year, its tolls were as much as 40% lessthan Nova’s former postage-stamp charge. AEC says it still offers abargain compared to distance-based rates proposed by Nova thisspring. Parent Alberta Energy, chief producer in the Suffieldregion, holds most of the capacity on the proposed new line.

Drazen said Nova can get rid of the rivalry by giving toll cutsto AEC Suffield’s backers in the same way that it put a stop to a1996 bypass project titled Palliser by granting the shippersdiscounts known as “load retention service.”

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