Petro-Canada has won the latest round in a continuing drive by Canadian natural gas producers to foster a competitive market in pipeline services. The National Energy Board (NEB) granted Petro-Canada approval to lay a bypass, titled the Medicine Hat Pipeline, past southeastern Alberta facilities of TransCanada Pipelines Ltd.’s Nova Gas Transmission. The project also detours around earlier bypass lines built in the prolific production region by Alberta Energy Co (AEC).

The NEB said it “recognizes that the Medicine Hat Pipeline is a duplication of facilities in the region.” But there was “uncontradicted evidence” showing that Petro-Canada acted only after unsuccessfully exploring all alternatives including discount LRS or load-retention service tolls by Nova, a purchase of Nova facilities, and shipping on the AEC system.

The NEB said it “agrees that the public interest will be served by the Medicine Hat Pipeline by lowering transportation costs, the benefits of which will not only accrue to Petro-Canada and any third parties selling their gas to it, but also to the region as a whole. Enhanced recovery of gas resources will be another benefit of the Medicine Hat Pipeline.”

The plan calls for construction next fall of a C$10.1-million (US$6.5 million) line to carry 53 MMcf/d of gas 44 miles from the Suffield Block in southeastern Alberta across the Saskatchewan boundary to a connection with TransCanada’s mainline at Burstall.

Petro-Canada intends to use about 60% of the delivery capacity for its own production, and to buy gas from other producers in the region to fill up the line. Petro-Canada predicts the project will save it C$4.2-to-$4.7 million per year (US$2.7-to-$3 million) compared to the costs of using Nova service in the region, and C$100,000-to-$600,000 (US$64,000-to-$385,000) annually compared to the best deal offered by AEC.

The NEB ruling noted that Petro-Canada billed its project as a blow “for a functioning gas transportation market.” The producer maintained “new entrants to the market should be encouraged” because “competition lowers transportation costs. When costs are lowered, drilling is encouraged and the life of reserves is increased, which benefits producers, governments collecting royalties and ultimately consumers.”

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