Canadian natural gas producers say their Alaskan counterparts did them a favor by withdrawing the American entry from the northern pipeline race — and that they have a right to collect on it now.

The Canadian Association of Petroleum Producers has told the National Energy Board the Alaskan delay should put a stop to a plan by TransCanada PipeLines Ltd. to hike shipping charges by C$250 million (US$160 million) per year.

The claim surfaced in written submissions for hearings that the NEB will hold later this winter on the finances and tolls of Canada’s biggest natural-gas transporter. For the second year in a row, TransCanada requests for revenue and fee increases have set off lengthy proceedings.

CAPP accuses TransCanada of inflating its financial requirements by forecasting construction of an Alaskan gas production and pipeline project years too early. The timing of the northern development affects TransCanada claims for depreciation expenses which in turn influence pipeline revenue requirements and shipping tolls.

CAPP says the decision last year by BP, ConocoPhillips and ExxonMobil against proceeding with the Alaskan development, as uneconomic any time soon, significantly prolongs the useful life of the TransCanada system.

As a result, the Canadian gas producers say the NEB should deny the pipeline’s request for a raise in its annual depreciation expense that works out to 40% or C$250 million (US$160 million). TransCanada wants its allowed annual depreciation rate accelerated to 4.12% from 2.89%.

The depreciation rate hike reflects a TransCanada forecast that Alaskan gas will start flowing to the Lower 48 United States in 2010 or ’11, or on the original schedule proposed by the American producers. That fast timing generated a major addition to the American entry in the arctic pipeline contest — a new “express” line across half the continent between the end of the northern leg in British Columbia and Chicago.

It was intended to bypass TransCanada, which was expected to be too full of Canadian gas to take Alaskan production if it found its way south in 2010-’11. Declines in western Canadian productivity later in the 2010s would leave TransCanada to run increasingly empty because there would be no Alaskan gas to fill the vacated pipeline capacity. As a result, TransCanada makes a case that it needs to start recovering costs of its system faster now by accelerating its depreciation rate.

Even a short delay in the forecast of Alaskan deliveries starting, to 2016, generates an entirely different outlook, CAPP says. By then, the anticipated decline of western Canadian production is expected to open up enough room on TransCanada for it to deliver Alaskan gas in large volumes. That would eliminate the need for the new express route in the future, and for the toll hikes that would be caused by accelerating TransCanada’s depreciation rate now. CAPP also points out that TransCanada has already put itself into position to participate in the eventual northern project by participating in a revival, now under negotiation among its original sponsors and others, of the dormant Alaska Natural Gas Transportation System.

CAPP suggests that while growing North American demand and depleting supplies in established producing areas will eventually revive the Alaska project, its resurrection will likely be later rather than sooner.

“The timing of this gas will be dependent on prevailing market conditions,” CAPP says in its written testimony before the NEB. “As conventional supplies tighten, resulting upward price pressure will help to make this gas supply economic, so that it will be developed.”

Making Alaska wait until space opens up on TransCanada is forecast to enhance the northern development prospects by allowing producers to devise a more efficient project. “Given the vast distance associated with bringing this gas to market, the economic viability of this resource is substantially enhanced to the degree it can make use of the existing pipeline infrastructure,” CAPP says.

The Canadian producers point out that while echoes of the hot political debate in 2001-02 over northern pipelines continue to be heard in Alaska and Washington, D.C., trusted American forecasters have faced up to the decision by BP, ConocoPhillips and ExxonMobil. CAPP reminds the NEB that the latest long-range forecast prepared by the U.S. Department of Energy’s Energy Information Administration predicts Alaskan gas will take until about 2020 to reach markets.

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