National Energy Board approves the one pipeline that Alberta’s government opposes

CALGARY — The National Energy Board has approved a TransCanada Corp. pipeline project that will move natural gas from British Columbia into Alberta, despite the opposition of local energy companies and concerns of the Alberta government.

In a closely watched decision Wednesday, Canada’s pipeline regulator announced it would allow TransCanada to build its $1.4-billion North Montney Mainline pipeline project and, controversially, flow the natural gas it would carry from B.C. into Alberta.

In a surprise move, however, the NEB rejected TransCanada’s request to keep its current approach to tolling gas producers, which was another issue that divided the gas sector during the North Montney Mainline hearing process.

“Such tolls would neither adhere to the principle of cost causation nor foster the goal of economic efficiency,” the NEB said in its decision.

A spokesperson said “TransCanada is pleased with the NEB approval of our North Montney project.”

The pipeline company had originally designed the North Montney Mainline to ship natural gas westbound toward LNG export projects on the B.C. coast, but those projects have been delayed or cancelled outright. The delays caused TransCanada to vary its request so it could ship that gas production eastbound — a controversial move, which has turned energy companies against each other.

Gas producers with assets in B.C. have said they need the pipeline to move natural gas to market, especially in the absence of any LNG export projects.

But producers with assets in Alberta have opposed the project, and intervened in the regulatory process, asking the NEB to delay its construction because it would feed into TransCanada’s existing gas network in Alberta and possibly exacerbate a glut in the Alberta Energy Company (AECO) market, further depressing prices.

“I think we were most disappointed with the timing of the North Montney Mainline,” said Peyto Exploration and Development Corp. president and CEO Darren Gee.

“It’s not that we ant to object to building more infrastructure in the Western Basin – the problem is we need egress right now, not connection,” Gee said, adding that the project is “premature” because it connects new supplies to the AECO market at a time when TransCanada is still trying to eliminate bottlenecks from the existing system.

Alberta’s natural gas market has suffered through volatile price swings, which pushed the AECO benchmark into negative territory last year for the first time.

In an ironic twist, the pipeline from B.C. has also attracted the opposition of the Alberta government, which is hard at work trying to win support for Kinder Morgan Canada’s Trans Mountain pipeline expansion to B.C. However, Alberta’s energy department has said its concerns with the project are unrelated to its dispute with the B.C. government.

The province’s energy ministry intervened in the regulatory process over concerns about AECO pricing — which affects government royalties — at a time when TransCanada has yet to upgrade pinch points within the system and capacity to move gas out of Alberta.

The Alberta government did not respond to requests for comment Wednesday.

The energy ministry intervened in the regulatory process over concerns about AECO pricing — which affects government royalties — at a time when TransCanada has yet to upgrade pinch points within the system and capacity to move gas out of Alberta

Concerns about the AECO market and pipeline egress issues led to Alberta Energy Minister Marg McCuaig-Boyd convening a panel this week to advise the government on how to resolve issues affecting the AECO market. The panel includes former TransCanada and Talisman Energy Inc. CEO Hal Kvisle, former Canadian Energy Pipeline Association CEO Brenda Kenny and former Alliance Pipeline Ltd. CEO Terrance Kutryk.

The panel was well received by Canadian gas producers.

“We were pleased to see the announcement yesterday from Minister McCuaig-Boyd,” said Jupiter Resources vice-president, capital markets and public relations Ryder McRitchie, who called the panel “a positive step in addressing a more holistic solution for Western Canadian natural gas.”

For its part, TransCanada launched multiple open-season bidding processes over the winter to drum up support for the expansion of its existing NGTL system to ease the constraints within the system.

At a recent forecasting event, GMP FirstEnergy analyst Martin King said TransCanada is working to expand the system before the North Montney Mainline project moves that gas from B.C. into Alberta in 2020.

“It remains to be seen whether they’ll get this stuff straightened out or not,” King said. “It looks like the system is going to run full for the next two years.”

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