With just over a year to go before the new Alberta-to-Chicagolink, Alliance Pipeline, goes into service TransCanada PipeLinesand affiliate Nova Gas Transmission already are feeling the impactof the competition.

TransCanada told the National Energy Board its main line haslost 580 MMcf/d in traffic from shippers that have given formalnotices they will not renew transportation contracts when thecurrent gas-sales year ends Oct. 31. At the same time, 362 MMcf/dof traffic is dropping off TransCanada’s Nova pipeline grid inAlberta. TransCanada says the pipeline community’s “currentbusiness environment is characterized by low transportation valuesand an expectation of pipeline capacity that exceeds the supply outof western Canada and demand in the eastern Canadian market.”

The comments came in a proceeding on another potentialcompetitor, TriState Pipeline, which proposes to pick up 450 MMcf/dwhere Alliance leaves off at the Chicago hub and move gas furthereast through Indiana and Michigan to Union Gas’ Dawn, ON hub.

TransCanada predicted it would have to raise its tolls by about9% to make up for its losses if its customers switched 450 MMcf/dof shipments over to TriState. The pipeline said its toll tocentral from western Canada would go up C$0.08 (US$0.057) pergigajoule. The rate has been C$0.887 (US$0.63), but TransCanada hasalready applied for an increase to C$0.936 (US$0.67).

It’s not clear how much of a threat TriState poses, since thatpipeline has run into heavy jurisdictional weather in the U.S. andhas asked the NEB for an indefinite postponement of Canadianhearings that had been scheduled to start Sept. 8.

TriState blamed the pause partly on delays in resolving land andenvironmental issues with an Ontario native group, the WalpoleIsland First Nation. But the project, sponsored by affiliates ofWestcoast Energy and CMS Energy, also acknowledged that aconstruction application by its namesake American leg has run intomultiple problems before FERC.

FERC objected to TriState’s proposal to lease 123 miles ofHinshaw pipeline facilities from sponsor CMS’ affiliate ConsumersEnergy, with the leased line being operated by Consumers andperforming a “dual use” role as both interstate and intrastatetransporter under dual federal and state jurisdiction. But FERCwants total jurisdiction. Staff held a technical conference earlierthis month and is due to report back to the Commission soon,although it’s not clear the issue has been resolved.

TriState is not TransCanada’s only problem. Vector Pipelinealready has FERC approval to carry up to 1 Bcf/d to the burgeoningNortheast gas market via the Chicago-to-Dawn Hub route and isexpected to begin construction later this year.

The promise of additional capacity and rising sophistication atusing the system among traders is spurring the Canadian pipelineestablishment to action. TransCanada says the industry “is alsobeing reshaped by the emergence of liquid market hubs and alternatetransportation capacity into southern Ontario, which now providecompetitive alternatives to long-haul firm transportation contractson the TransCanada system. Market hubs provide shippers with theopportunity to purchase gas on the spot market closer to their loadcentres rather than in the producing basin.”

There is also a hint – one Canadian gas shippers have beenwaiting a long time to hear – that the old-line transporters intendto do more than make cases for the status quo at regulatoryagencies. The established pipelines intend to compete with thenewcomers too.TransCanada said discussions are under way with itscustomers on “toll and service solutions that will respond to thiscompetitive market,” which will eventually be laid before the NEBfor approval.

Gordon Jaremko, Calgary

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