Canada’s National Energy Board (NEB) has refused to let TransCanada Corp. grab an early lead in building new pipelines for shale gas in northern British Columbia (BC) by rejecting immediate construction of a jumbo link to the main drilling target, the Horn River Basin.

The Komie North Extension proposal by TransCanada’s western subsidiary, Nova Gas Transmission Ltd. (NGTL), jumped the gun on still-uncertain shale prospects at potentially great risk and expense to others, the NEB said in its decision Wednesday to reject the project.

The board said the price tag of the proposed 97-kilometer (58-mile) of 91-centimeter (36-inch) diameter pipe — about C$300 million — only represented a start on costs of TransCanada’s plan to integrate Horn River Shale development into the Alberta-based NGTL grid.

TransCanada-NGTL acknowledged — in evidence dredged up at hotly contested hearings last fall in Nelson, BC, and Calgary — that the long-range scheme required another C$858 million in additions to the Alberta grid by 2019, then more construction later, the NEB ruling said.

But the Komie project only had one customer; a pioneer northern shale developer based in the United States, signed up for a transportation service contract, the NEB decision said.

The customer’s name was kept confidential in Canada but was disclosed in financial filings with the U.S. Securities and Exchange Commission to be a Calgary subsidiary of Fort Worth, Texas-based Quicksilver Resources Inc., said the NEB.

In the formal language of the board’s decision, the TransCanada-NGTL proposal violated regulatory principles of “cost causation” and “user-pay” that are designed to ensure that costs of pipelines are spread fairly by tolls charged to all their customers.

A rolled-in toll regime was proposed for Komie North, meaning all users of the NGTL network would chip into costs of the new B.C. pipe.

“The proposed rate design would unreasonably subsidize the extension of the NGTL Alberta System into an area where it would compete with infrastructure already in place,” said the NEB decision. “The board finds significant risk associated with the contractual support. The three contracts for Komie North are with only one shipper, which increases the risk compared to having multiple shippers.”

The NEB approved an initial addition of facilities to the NGTL grid in northern Alberta as a start on laying new pipe for projected increases in BC gas production. The project will install 33 kilometers (13 miles) of 120-centimeter (48-inch) diameter pipe at a junction point known as Chinchaga near the Alberta-BC boundary.

No slight against BC’s shale gas potential is intended by the pipeline ruling, the NEB said. “The recommendation that a certificate not be issued for Komie North should not be interpreted as a reflection of the board’s opinion about the potential for the development of Horn River Basin supply.” (Board rulings are formally recommendations to the federal cabinet in Ottawa, which has a final ratification say.)

Saturated gas markets and low prices across North America mean “the extent and pace of development in the Horn River Basin remains an open question in the near to medium term,” said the board.

But the NEB described itself as “confident that in the longer term the production levels contemplated in NGTL’s forecast are plausible.” In addition, the ruling said “the board recognizes the potential for LNG [liquefied natural gas] exports” projected by a growing lineup of pipeline and terminal projects on BC’s northern Pacific Coast.

The NEB and TransCanada-NGTL alike forecast that commercially recoverable Horn River Shale reserves are on the order of 100 Tcf. Another 17.5 Tcf is expected from a smaller nearby geological formation, the Cordova Embayment. Still another 9.7 Tcf is accepted as awaiting production from conventional reserves.

The rejection of the Komie North proposal leaves the field of building pipeline services for northern BC shale gas wide open to competition as drilling and development occur. Spectra Energy Transmission (Westcoast), as operator of the BC gas services grid for half a century, put up a vigorous fight against the TransCanada-Nova scheme. Spectra has embarked on early stages of plans for expansion of its northern pipelines and processing plants in stages sized and timed to match production increases.