Natural gas producers oppose pipeline

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 hearing room 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 main 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 underway to expand the infrastructure.

Alberta natural gas prices, measured as the AECO benchmark, fell into negative territory for the first time 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 nowcancelled LNG export projects will flood the Alberta market, further depressing AECO prices.

In an NEB filing, TransCanada subsidiary Nova Gas Transmission Ltd. 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 Jones partner Lawrence Smith, acting on behalf of ATCO Gas and Pipelines Ltd., asked TransCanada executives whether the company 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.” ATCO has delivery contracts with TransCanada to ship gas produced in Western Canada to its utility customers.

Only 780 million cubic feet per day were initially associated with the North Montney project in 2013.