After a 15-year run of unopposed growth, exporters of Canadian natural gas have a fight on their hands on the East Coast. The New Brunswick government, frustrated by industry rejection of a new pipeline for Atlantic and central Canadians, has appealed for federal intervention against dedication of supplies from offshore of Nova Scotia to the northeastern United States.

The province has asked the National Energy Board (NEB) to make Atlantic Canada an exception to the cornerstone of Canadian gas free trade policy, the “market-oriented” export liberalization enacted by the NEB in 1987 to carry out the 1985 federal-provincial Western Accord on Energy. The intervention is being sought in time to affect decisions by the federal and Nova Scotia governments on PanCanadian Energy’s C$1.1 billion (US$700 million) Deep Panuke offshore gas development and Maritimes & Northeast Pipeline’s associated C$190.8 million (US$120 million) capacity expansion.

New Brunswick lodged its appeal as PanCanadian and M&NP filed applications before the NEB and the Canada-Nova Scotia Offshore Petroleum Board. The projects are the first additions to the fledgling East Coast gas industry launched when the Sable Offshore Energy Project started production and M&NP began deliveries to the northeastern United States two years ago.

The request for intervention followed the shelving in February of up to C$733 million (US$460 million) in new facilities proposed by the Cartier Pipeline partnership of Enbridge Inc. and Gaz Metropolitain. Their plan — for a new link between Nova Scotia and markets in Atlantic Canada, Quebec and Ontario — ran aground on resistance by M&NP, the Canadian Association of Petroleum Producers, the Nova Scotia government and the East Coast Producer Group of ExxonMobil Canada, Shell Canada, Imperial Oil and Mosbacher Operating Ltd.

New Brunswick observes that the Cartier plan collapsed despite offers of savings on pipeline tolls, improved prices and diversified markets for Atlantic gas. As a result, the province says it “can only conclude that the Scotian offshore producers are not basing their stance on market considerations.” The province says “one incremental Atlantic offshore producer (PanCanadian) and the monopolistic transport system comprising M&NP and M&NE (the abbreviation used for the U.S. leg of the Maritimes pipeline) do not constitute a properly functioning market…in the absence of such a market, closer regulation by the board is appropriate.”

The appeal calls for the NEB to hold hearings on whether continuing to commit offshore gas to U.S. markets will allow reasonably foreseeable needs of Canadians to be satisfied. The province wants the case heard before or during the forthcoming reviews of the Deep Panuke and M&NP expansion projects. Federal legislation still requires the NEB to safeguard supplies for Canadians. Before 1987, the industry was required to hold up to 30 year stockpiles of gas off the export market for domestic needs. Under the 1987 gas-trade liberalization, the board rubber-stamps short export contracts lasting less than two years and approves longer deals without inquiries into future supplies unless Canadian consumers resort to a special “complaint procedure” to prove they cannot obtain supplies on the same terms as U.S. buyers.

New Brunswick says the policy has left the NEB unable even to investigate Canadian needs for Nova Scotia gas because its producers have been sending it to the U.S. almost entirely under short-term export licenses. The protesting province points out that the system was devised without Atlantic Canadian participation, to carry out a 1985 energy accord that included only the federal, Alberta, British Columbia and Saskatchewan governments.

“The federal government and the board made all this policy for and in the context of the Western Canadian Sedimentary Basin, where there are many different transport systems for taking it to markets, allowing true market forces to work successfully,” New Brunswick points out. “Neither the federal government nor the board had the Scotian Shelf explicitly in mind when making these policies.”

Access to offshore gas, including support for the Cartier project in the absence of pipeline connections to western Canada, is a cornerstone of New Brunswick energy and industrial development policy. The province says it “wants to attract industries by being able to offer them access to incremental supplies of Scotian offshore gas and so obtain the consequential economic benefits.”

The protesting province recites a case of a 350 MW, gas-fired power project sponsored by Tractabel Energy Marketing Inc. of Houston being scrapped because it could not secure fuel supplies, and says it is collecting more examples of New Brunswick’s needs being “prejudiced.”

The appeal for intervention also includes a description of a rebuff dealt by PanCanadian this winter to New Brunswick’s assistant deputy energy minister, Don Barnett. When he met company representatives in Calgary on Dec. 7, ‘they told him that for several reasons — such as ‘greater liquidity, and ‘diversification in the customer base,’ and ‘option difference values’ — their company preferred to sell its Deep Panuke gas in the Boston market rather than in New Brunswick, Quebec and Ontario through the Cartier project.”

New Brunswick describes Deep Panuke as “the one foreseeable incremental Scotian offshore supply.” The province points to disappointing drilling results lately and especially to reductions this winter in offshore reserves by Shell, ExxonMobil and Pengrowth Corp. The NEB needs “to decide whether or not the Maritime market, which is not economically accessible to WCSB gas supplies, is entitled to its own set of rules in order to protect the Canadian public interest,” New Brunswick says.

The NEB received the appeal without comment, except to acknowledge the request and say a procedure for dealing with it will be announced at an unspecified later date. Decisions are also awaited on procedures for dealing with the PanCanadian and M&NP projects.

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