TransCanada Corp. is preparing an overhaul and expansion of northwestern Canadian pipeline service that will knit Alberta and British Columbia (BC) into a natural gas common market, with producers driving the changes and provincial authorities cooperating.
The scheme’s outlines are emerging at Calgary hearings before the National Energy Board (NEB) in its first step. Job one is a historic transfer of jurisdiction over the 23,500-kilometer (14,700-mile) NOVA pipeline grid in Alberta to the NEB from the Alberta Utilities Commission. The Alberta government is consenting to the switch on one condition — that TransCanada delivers on the plan.
Alberta Energy Minister Mel Knight described the jurisdictional switch as a logical and reasonable next step in gas industry evolution when TransCanada filed its application with the NEB earlier this year. A ruling is due in early 2009, including a decision on when to make the switch effective.
NOVA can become a federal concern with provincial consent as soon as a construction application is filed with the NEB to build a pipeline extension across the border into BC, Jill Page, regulatory affairs director of Alberta Energy, told the hearings. “Things have changed. The Western Canada Sedimentary Basin (WCSB) [production] is expanding,” she acknowledged.
The BC extension is promised to be coming soon. TransCanada Senior Vice President Max Feldman testified that the request for the NEB to take over supervision of NOVA grew out of talks with Alberta gas production companies developing new BC supplies. The producers want both the transportation and trading services operated in Alberta, Feldman reported.
Negotiations, in the form of “open season” auctions of binding transportation capacity contracts, are under way on potential NOVA extensions into three BC drilling hot spots, said TransCanada Vice President Stephen Clark. “I would expect we would be filing an application for at least one (pipeline project) in the early part of next year.”
The pipeline scheme is intended to pool northern BC and Alberta production together into a giant gas warehouse. The BC gas that goes into NOVA extensions will be absorbed into a NOVA systemwide trading and pricing network, testimony at the NEB hearings indicates. Details including tolls and service charges remain to be thrashed out later, after the proposed NEB takeover of jurisdiction.
Known as NOVA Inventory Transfer or NIT for short, the trading and pricing network has been described by TransCanada as North America’s biggest and most liquid gas hub. More than 11 Bcf/d of gas already goes through the NOVA grid, with almost all the volumes produced in Alberta except for marginal amounts creeping in from BC and Saskatchewan.
Just how much gas will be added to the hub from BC remains to be seen. Shale gas development schemes in northern BC are emerging as western Canada’s hottest drilling action. EnCana Corp. alone predicts that its BC shale output, now just beginning, will hit a Bcf/d.
A long lineup is forming among Canadian producers to get in on the action, which uses technology imported from the Barnett Shale region of central Texas. The BC version is still in its infancy and the development pace remains unpredictable, especially due to rugged natural conditions in the region.
Unlike the flat, dry terrain of the Barnett, the BC target areas are remote, cold woods and muskeg swamps. Roads and drilling platforms are being built with jumbo “mats” that are fir rafts, which float on the soft northern ground. The BC government is helping out with a special royalty regime that charges only nominal rates until development costs are paid off and enables producers to deduct special expenses of installing northern services such as roads.
In probably the last provincial decision on a major addition to the NOVA grid, the Alberta Utilities Commission recently approved a cornerstone of TransCanada’s plan — a direct route to a growing market for BC gas. The ruling authorized TransCanada to build a C$925 million (US$740 million) link called the North Central Corridor. The project is a 300-kilometer (188-mile) pipeline from the BC border across Alberta to the Athabasca oilsands region, where bitumen extraction operations rely heavily on steam injections and electricity generated by gas-fired boilers.
The planned deliveries — 1.3-1.5 Bcf/d at first, in jumbo pipe that can increase shipments by adding compressors later — are enough to satisfy currently forecast gas demand growth in the Alberta bitumen belt. The new corridor’s capacity also exceeds initial gas deliveries proposed for the stalled Mackenzie Valley pipeline project.
In the NEB jurisdictional case, the Northwest Territories enthusiastically supports TransCanada, on grounds that the scheme blazes a new trail towards economical development of northern gas in affordable stages. The top of the current NOVA network is only about 100 kilometers (62 miles) south of the territorial boundary with Alberta on the 60th parallel of latitude.
TransCanada has made an Alberta construction application for an extension that would close the gap. The project was originally intended as the southernmost leg of the Mackenzie line, but there is gas far south of its proposed inlet most of the way to the Beaufort Sea at Inuvik. “Extension of the Alberta system into the Northwest Territories is one of the available means to expand the delivery system for WCSB gas,” the territorial government says.
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