Natural gas producers oppose pipeline
CALGARY • Regulatory hearings for a natural gas pipeline that has divided the Canadian oilpatch opened amid tense exchanges Monday, as companies argue that the proposed pipeline will hurt rather than help the Western Canadian natural gas market.
Lawyers packed a National Energy Board heari ng room almost to capacity Monday as parties argued over the viability of TransCanada Corp.’ s North Montney Mainline natural gas project, and the prospect of flooding the already over-saturated Alberta natural gas market with volumes from British Columbia.
The 305- kilometre conduit will connect the promising shale-rich Montney region to TransCanada’s main NOVA Gas Transmission system.
While it may seem ironic that some producers are against a new pipeline, their primary concern is that TransCanada is gathering more supplies from new production centres without expanding the existing system. For its part, TransCanada says other initiatives are under way to expand the infrastructure.
Alberta natural gas prices, measured as t he AECO benchmark, plunged into negative territory for the first time ever last year amid a glut of natural gas supply and as TransCanada performed maintenance on its existing system, at the same time changing its policies to access its gas pipeline network in the province.
Now some natural gas producers believe that if the North Montney pipeline project proceeds, natural gas from British Columbia that had once been committed to now- cancelled LNG export projects will flood the Alberta market, further depressing AECO prices.
In an NEB filing, TransCanada subsidiary Nova Gas Transmission Ltd. (NGTL) said it had contracted 1.485 billion cubic feet of natural gas from 11 companies, including Progress Energy Canada Ltd., which plans to move its gas out of northeastern B. C. after its Malaysian parent company Petronas Bhd. and partners abandoned their LNG project on the West Coast. Progress alone had contracted 700 million cubic feet of that capacity.
Bennett Jo nes partner Lawrence Smith, acting on behalf of ATCO Gas and Pipelines Ltd., asked TransCanada executives whether the c o mpany had built enough capacity throughout its natural gas system in Alberta to handle the additional volumes.
“It’s the core of this issue about downstream bottlenecks and the responsibility for the related costs,” Smith said. ATCO has delivery contracts with TransCanada to take gas produced in Western Canada and ship it to its utility customers.
Only 780 million cubic feet per day were associated with the North Montney mainline project when it was originally proposed and approved back in 2013.
“So if those volumes — that 1.485 bcfd of incremental gas over four years — comes on and no incremental capacity is built, who gets bumped off the system? Why do (the companies that committed to this project) get a prior, or higher, acquired right because they were part of a proposed project?” Smith asked.
The Financial Post has learned that multiple natural gas producers, including Jupiter Resources Inc. and Peyto Exploration and Development Corp., are concerned about the project’s effect on Alberta gas prices. Rival Enbridge Inc.’s West Coast Energy Inc. and Puget Sound Energy are among the companies cross- examining TransCanada at the hearings which are expected to last five days.
Patrick Keys, TransCanada vice-president, Canadian gas pipelines, countered that the company was continuing to expand its network and is currently calling for bids to expand its gas pipeline network between northwestern Alberta and an export point in the province’s southeast.
Keys said the company is also planning other expansions — which were not the subject of Monday’s crossexamination — that would allow natural gas producers to move their gas from northern Alberta across the market to key export points.
“We don’t want to overbuild the mainline portions of our system,” Keys said, adding that overbuilding the system would add costs for its customers, which would be recovered through higher tolls.
However, he did note that there was an excess of natural gas supply in Western Canada right now that is creating competition for space on TransCanada gas pipeline network.
“There’s actually competition on the supply side for the market,” Keys said, noting the competition was beneficial for gas consumers “because it probably drives the price down at the end of the day when there is an overhang of supply competing for a limited market.”
The oversupply of natural gas in Alberta has ignited a major division within the oilpatch, with some companies blaming TransCanada for disconnecting AECO price from other North American benchmarks.
WE DON’T WANT TO OVERBUILD THE MAINLINE PORTIONS.