A summer of dueling over services and tolls on the crowded eastern end of TransCanada Corp.’s natural gas Mainline ended Friday in a deal to eliminate the cause of the fight by adding capacity.
In letters to the National Energy Board (NEB) Canada’s three biggest distributors — Union Gas (Spectra) in southwestern Ontario, Enbridge Gas in Toronto and Gaz Metro in Quebec — said they an reached agreement to build a Mainline addition called Kings’ North.
TransCanada said the settlement will “provide customers with the flexibility to source gas from various geographic locations while ensuring that the tolls for the Mainline are set at levels that recover the costs of providing that flexibility.”
The deal calls for Kings’ North to be designed and built as a complementary service to pipeline additions also being developed by Union and Enbridge in southwestern Ontario (see Daily GPI, March 15, 2012), in the region between Toronto and the United States border near Sarnia, ON.
All three projects will add up to an expansion of the gas freeway that handles most of the rapidly increasing Canadian imports of U.S. gas, primarily from Marcellus Shale.
The northbound traffic has more than doubled since 2007 in six consecutive record years. U.S. exports into Canada hit 971 Bcf in 2012, and kept on growing at a rate of about 5% in first quarter 2013, according to the U.S. Department of Energy.
The pipeline additions by TransCanada, Union and Enbridge will increase capacity for U.S. exports to flow across Ontario and Quebec from the growing Dawn storage and trading hub between Sarnia and Toronto.
The majority of Canadian imports from the U.S. reach Dawn via a pipeline border crossing from northern Michigan beneath the St. Clair River. Gas reaches the region through multiple U.S. pipelines. Canadian imports from the U.S. are also on the rise via a border crossing in the Niagara Falls region.
TransCanada, Enbridge, Union and Gaz Metro did not disclose details of their plans for the pipeline additions or eastern Mainline tolls but said the agreement will enable them to work out a comprehensive settlement of all the issues.
In their letter to the NEB, requesting immediate termination of hotly contested hearings that began this week in Calgary, the local distribution companies (LDC) say “the present litigious atmosphere has created uncertainty in the marketplace including for the LDCs, their customers and TransCanada. The settlement provides for the resolution of all outstanding disputes.”
The distributors added, “The current tolling framework results in a substantial disincentive to TransCanada to improve market access to Dawn and Niagara. In order to overcome this disincentive, the LDCs have agreed to a tolling framework which will ensure market access and supply flexibility, while providing cost recovery for TransCanada.”
The NEB is expected to grant the request to stop the duel after consulting other participants such as the Alberta Northeast Gas consortium of distributors from New England, New York and New Jersey, during a hearings recess that was scheduled to last from until Sept. 23.
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