A pipeline rivalry has added a practical dimension to an otherwise legalistic Canadian regulatory case about a proposed historic transfer of jurisdiction over Alberta’s Nova natural gas gathering network to the National Energy Board (NEB).

After losing the first contest over building new delivery service to the oilsands region before the Alberta Utilities Commission, Alliance Pipeline has set out to turn the NEB case into a second stab at winning its duel with Nova parent TransCanada Corp.

As the NEB prepared for November hearings on TransCanada’s application for the Nova jurisdiction transfer, Alliance urged the federal agency not to accept the last major provincial decision on expanding the Alberta grid as final. The provincial commission this month approved a TransCanada plan to build 190 miles of 42-inch diameter pipe as an addition to the Nova grid, officially titled the North Central Corridor and unofficially nicknamed “the oilsands lifeline” by bitumen producers (see Daily GPI, Oct. 20).

TransCanada and its supporters, including major factions of the Canadian gas and oil production sectors, told the NEB that if it takes over jurisdiction it should accept all parts of Nova, including approved but not yet built pieces. Alliance urged the federal board to make sure first that any permits for new lines are up to its standards. The NEB agreed to hear out both sides in a facilities portion of forthcoming hearings on the proposed jurisdictional transfer.

The northern Alberta project is the richest plum that has come along for the Canadian gas pipeline industry since Alliance was built nearly 10 years ago. For a relatively modest price tag currently forecast at C$923 million (US$740 million), the builder will own a jumbo new facility projected to open with deliveries of 1.3-1.5 Bcf/d. The large pipe diameter would also allow for rapid increases in deliveries with relatively low-cost additions of compressors.

The initial new capacity on North Central Corridor rivals deliveries by Alliance on its US$5 billion express line to Chicago from northeastern British Columbia and northwestern Alberta. North Central Corridor is also expected to siphon off gas from Alliance’s supply areas for much shorter deliveries into oilsands production and processing districts around Fort McMurray in northeastern Alberta and the provincial capital of Edmonton.

A new western Canadian deliverability forecast by the NEB, while using scenarios rather than making predictions, suggests that new northern BC shale gas fields will be a prolific production growth area, potentially more than making up for erosion of older conventional Alberta reserves (see related story). TransCanada, while advocating the North Central Corridor project, has repeatedly suggested new shale production in BC plus deeper drilling in Alberta will make western Canadian supplies much stronger than forecast by most industry analysts for the last decade. The oilsands lifeline is expected to be a key delivery route for BC gas.

Alliance unsuccessfully sought a delay in provincial approval of the jumbo TransCanada-Nova addition to open up time for full development of an alternative project, using an open season auction of proposed capacity. Alliance’s sales pitch was that oilsands requirements could be handled by a combination of existing delivery service plus a smaller new project capable of carrying about 700 MMcf/d.

Oilsands plants account for more than four-fifths of gas demand in the north-central Alberta area to be served by the new pipeline. Consumption by thermal bitumen extraction and synthetic oil upgrading plants already in operation or advanced development stages is forecast to nudge 2 Bcf/d.

The Alberta commission’s decision in favor of the TransCanada-Nova addition said it is in the province’s interest to approve lines “providing for reliable and sufficient gas supply for oilsands operations and heavy oil industrial projects.” The North Central Corridor line was supported by 14 oilsands developers, the Canadian Association of Petroleum Producers and the Industrial Gas Consumers Association of Alberta.

The provincial decision highlighted the strength and urgency of demand for gas — and pipeline delivery service — in the Alberta bitumen belt. The commission was told shortages are on the horizon unless construction of the pipeline addition proceeds. On peak demand days during the area’s frequent harsh cold snaps, shortfalls are projected to hit 110 MMcf/d in the winter of 2009-2010 then jump to 460 MMcf/d in 2010-2011.

Gas use by thermal oilsands plants averages about 1 Mcf per barrel of production. Consumption is on the rise as the Alberta industry completes new developments. To date, the global credit crisis and weakened commodity prices have only prompted temporary delays in production targets by new oilsands projects and no outright halts or postponements to developments currently under way.

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