As the fight over a demand for Canadians-first restrictions against exports of natural gas produced offshore Nova Scotia went to the final stage of oral hearings, a report in Washington highlighted the value of an open border to the industry. Canadian exporters cornered a record 87% of the gas market in New England during 2001, said a review of the trade by the U.S. Department of Energy (DOE).

The “unprecedented” domination of a major U.S. regional market was owed largely to Maritimes & Northeast Pipeline’s deliveries of gas from offshore of Nova Scotia, the department’s fossil energy branch said.

The profile of Canadian gas suppliers jumped in New England as soon as M&NP started delivering production from the Sable Offshore Energy Project to the Boston area 30 months ago. During 2000, Canadian exports took a 79.6% share of the New England market. The figure was 55.4% in 1999, when Canadian supplies were only available to the region from the western provinces via TransCanada PipeLines and its export branches.

Since the area started to attract the interest of exporters and pipeline projects as a growth front where gas was replacing oil imports, the Canadian share of the New England gas market has multiplied eight-fold. In 1988, Canadian supplies accounted for only 11% of New England gas consumption, which was 351.6 Bcf for the year. The regional market share held by exports jumped into the range of 40-50% in 1993, following completion of the new Iroquois Pipeline across the northeastern U.S. to draw gas from the western provinces off an associated expansion by TransCanada’s system between Alberta and eastern Ontario.

As of 2001, with the addition of Nova Scotia supplies, Canadian production owned nearly nine-tenths of a New England market that stood at 542 Bcf, up 54% compared to 1988.

DOE released its latest review of the international gas trade as the National Energy Board opened hearings on an attempt to reverse the tide in New England by the New Brunswick government. The sessions drew national attention in Canada when they opened with a statement by Premier Bernard Lord, who urged the NEB and its masters in Ottawa to make an exception to the 15-year-old deregulation policy that allowed development of the “continental” gas market. The province set off the hotly contested case with a formal demand for the NEB to create a disclosure procedure that would let Canadians bid on gas from offshore of Nova Scotia before M&NP, SOEP and new projects can dedicate the supplies to exports.

The U.S. report confirmed that the targets of the New Brunswick action — easily-obtained short licenses for international transactions — have become a key tool of the gas trade on both sides of the border. In the U.S., as in Canada, permits to traffic in gas across the border are issued with few questions asked and little or no public notice for periods of two years or less, because they are officially considered to be short-term commitments. Known in the U.S. as “blanket import authorizations,” the short-term permits issued by both countries are hunting licenses that grant gas dealers flexibility to drum up deals, without identifying customers or describing contracts in advance.

In Canada, the system is being defended against New Brunswick’s appeal for policing, by supplier groups such as the Canadian Association of Petroleum Producers as well as M&NP and SOEP. Supporters describe the short permits as an essential adaptation to the contemporary gas market, which often involves long chains of rapid sale and resale transactions among multiple suppliers, dealers and buyers.

NEB records show that about four-fifths of the gas leaving Canada moves under short permits. In the U.S., 76.4% of imports arrive under short authorizations, compared to 0.3% in 1985, when a Canadian federal-provincial agreement directed the NEB to dismantle a decades-old tradition of strict border controls.

The U.S. Energy Department reported that the use of short permits has accelerated since 1999, when they represented 60% of American gas imports from Canada. The system accounts for most of the traffic on the newest delivery connections, the Alliance Pipeline between northeastern British Columbia and Chicago as well as M&NP. About 90% of exports via M&NP travel under short permits. As old arrangements expire, they are not renewed, and long-term contracts and permits are only used in cases where supply assurances are essential features of projects, such as underpinning the financing of gas-fired power plants.

As the months-long wrangle before the NEB entered its final stage of public hearings in Fredericton, the supply side of the Canadian gas market stayed united in its opposition to New Brunswick’s call for a change. On the eve of the hearings, the provincial government picked up only one large ally from outside New Brunswick, the Canadian Industrial Gas Users Association. IGUA, a coalition of 50 energy consumers that use gas at a rate of about 160 Bcf/year, urged the NEB to support the goal that is driving New Brunswick’s request for complex regulatory changes.

Said IGUA: “Allow the Quebec and Ontario markets to benefit from access to gas supplies sourced from the East Coast offshore.” The industrial energy consumers encouraged the NEB to take action favoring development of a proposed new pipeline connection between Nova Scotia and Quebec.

New Brunswick lodged its appeal for regulation after SOEP, M&NP and CAPP defeated the proposal, known as the Cartier Pipeline, after a fight before the NEB last winter. “Given their heavy dependence on western Canadian gas, the markets of Ontario and Quebec would greatly benefit from access to a new alternative source of supply in Eastern Canada,” IGUA said. “Access to economically-priced East Coast natural gas delivered by a pipeline connected to the Scotian supplies would give IGUA members the opportunity to contract for gas supplies from competing producing regions, thereby reaping the benefits of competition.”

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