Regulatory dueling over tolls on TransCanada Corp.’s natural gas mainline west from Alberta has escalated into a fresh fight over a proposed facilities addition to the pipeline’s eastern end in Ontario.
In a protest letter to the National Energy Board (NEB), an irate Canadian Association of Petroleum Producers (CAPP) accuses TransCanada of trying to disguise a “historic change” as a routine construction application.
A July 18 filing by TransCanada seeks permission to add C$130 million in new pipe and compressor power in 2012 to its southern Ontario facilities in the Toronto region. The application uses an approach usually reserved for routine, non-controversial additions that uses standardized paperwork structured as check marks on brief boxes containing concise engineering descriptions.
CAPP’s letter, dated July 19, complains of “a total lack of any real information about what the application involves and what it means in the context of the crisis of competitiveness TransCanada faces with the Mainline.
“It is a ‘check-off-the-box’ filing with no detailed discussion of project justification, no explanation of the economic underpinnings of the project: shippers, services to be provided, markets, supply.” The bare outlines indicate that the new facilities would enable U.S.-sourced gas to flow from Niagara Falls — formerly a major Canadian export point — north to Toronto for the first time in 55 years of industry and trade history, CAPP said.
The scheme implies that further big changes are coming that will enable TransCanada’s northeastern U.S. export connections to deliver gas into Ontario from Marcellus Shale developments along the U.S. Atlantic seaboard, CAPP suggested. “These new supplies of gas are displacing traditional sources of supply. History is being rewritten in the marketplace.”
Canadian imports of U.S.-sourced gas have been rising gradually since the mid-1980s onset of energy deregulation and free trade, via a pipeline connection beneath the St. Clair River between southwestern Ontario and Michigan. CAPP said the Niagara Falls import scheme implies that much bigger flows are on the horizon. “Large supplies of gas in the Marcellus formation are now available close to Mainline traditional eastern markets. These new supplies of gas are displacing traditional sources of supply.”
TransCanada’s NEB filing said the facilities proposal is supported by requests for long-term service delivering about 446 MMcf/d of gas commencing Nov. 1, 2012. The shippers’ identities are not disclosed. Numerous Ontario gas dealers and users have been expressing interest in diversifying supplies and gaining better ability to shop around, with encouragement from the province’s energy regulators.
CAPP is demanding complete disclosures on the facilities plan, in light of TransCanada’s toll hikes and applications for more on its mainline out of Alberta. Rates rose steeply this year and further increases are expected in order to fulfill the mainline regulated revenue requirement.
TransCanada has pledged to file a long-range business restructuring and rate-making proposal with the NEB by September. In a brief supplementary paragraph to the new eastern facilities application, TransCanada said it revealed the additions blueprint on July 6 to shippers and industry interests organized as its tolls task force.
The supplementary note discloses only that CAPP and a Manitoba gas distributor objected to a TransCanada plan to roll-in the costs of the eastern facilities into the revenue requirement and tolls of the entire delivery network including the mainline. CAPP and the distributor agreed that the right arena for determining how to handle the costs will be the rate-making case that will follow the planned September restructuring filing, TransCanada said.
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