The promised new era of competition is officially off andrunning in Canadian gas transportation after the National EnergyBoard approved a small project with large implications, AECSuffield Gas Pipeline Inc.

The ruling is a landmark package that included authorizing abypass around Nova Corp.’s 40-year-old franchise in the chiefgas-producing province of Alberta, introduction of “market-based”negotiated tolling, and rejection of attempts to preserve the oldorder by the Alberta Department of Energy and environmentalists.

AEC Pipeline, wholly-owned by Alberta Energy Co., was told to goahead and build by Nov. 1 a C$22.8-million (US$16-million), 72-mileroute for 175 MMcf/d of capacity from the parent company’s prolificSuffield field in southeastern Alberta to a connection withTransCanada PipeLines in southwestern Saskatchewan at Burstall.

The construction application ignited a hot flurry of protests byNova when it was made last September, as an allegedly unnecessaryduplication of facilities that would reduce use of the traditionalgrid and generate rate increases under traditional cost-of-servicetolling enforced by the Alberta Energy and Utilities Board. Thefight lasted until late spring, when Nova withdrew all itsobjections to comply with the spirit of an accord on competition itand TransCanada signed with Canadian gas producers’ tradeassociations. The old-line transporters agreed to switch ratherthan fight, by working on new approaches that will let them competeon an even footing with upstarts like AEC Pipeline.

The new bypass departs sharply from Canadian tradition with amarket-based tolling system, where shippers negotiate fixed ratesfor the lifetimes of service contracts and earn discounts bysigning long-term agreements. AEC’s shippers, primarily AlbertaEnergy’s AEC Marketing and also GEX Resources and Channel LakePetroleum, estimate they will achieve annual savings of C$6.2million (US$4.4 million) compared even to revised, distance-basedrates under negotiation between Nova and the rest of the Canadianindustry. AEC shippers pay fixed rates ranging from C14.7 cents(US10.5 cents) per gigajoule under 20-year service contracts toC17.5 cents (US12.5 cents) under five-year deals.

©Copyright 1998 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press,Inc.