A $2.6 billion pipeline project aimed at increased exports of Canadian gas to the U.S. Northeast has cleared a legal roadblock.
The Federal Court of Canada rejected an appeal by an association representing major Canadian gas users that threatened an expansion program by TransCanada PipeLines Ltd.
With that issue heading toward a decision before Canada's National Energy Board (NEB), another continued to shape up when the Alberta government warned California energy regulators they have gone too far in "interventionist" bargain hunting on gas prices.
COURT DECISION
The federal court rejected a bid by the Industrial Gas Users Association (IGUA) representing buyers in Ontario, Quebec, and Manitoba, to widen terms of an NEB hearing into the TransCanada expansion proposal.
The project is designed to move more western Canadian gas to the U.S. Northeast via a link with the proposed Iroquois Gas Transmission System in the U.S.
NEB has been examining TransCanada's proposal for 6 months.
A favorable ruling for gas users would have prolonged NEB hearings and delayed the project.
A major issue in NEB hearings is whether cost of the expansion should be shared in tolls by all pipeline customers or whether companies that will benefit most from export sales should pay most of the cost.
TransCanada currently uses a rolled-in toll system in which costs are shared by all customers.
Gas users say this will add $150 million/year to consumer costs for an export-oriented project.
NEB is expected to make a decision on the toll issue by autumn.
TransCanada and Iroquois hope to begin deliveries in 1991.
IGUA said that it will continue its battle on the toll issue.
GAS PRICE ISSUE
The Alberta Petroleum Marketing Commission spelled out its price position in a letter sent to the California Public Utilities Commission (CPUC). CPUC has been urging California utilities to seek gas price cuts.
Alberta producers recently completed a new contract with California gas buyers that will cut net wellhead revenues on gas sales of $800 million (U.S.)/year by about $25 million/year. The agreement, covering sales of more than 1 bcfd, includes a two tier price system for peak and off-season sales (OGJ, Aug. 6, p. 36).
The Alberta agency said the province hopes to avoid a confrontation with California on gas sales, but if CPUC takes actions that will penalize Alberta producers the Alberta government will respond.
The recent contract was negotiated between a pool of Alberta producers and Alberta & Southern Gas Ltd., Calgary, a unit of Pacific Gas & Electric Co., San Francisco.
The Alberta marketing agency said CPUC policies would disrupt freely negotiated contracts, hurt sales, reduce California's reliability as a market for Canadian gas, and upset long standing policies of Canadian and U.S. energy trade agencies.
The Alberta agency did not say what actions will be taken if the CPUC continues its policies. The Alberta government has the authority to deny export permits for gas and to impose fines for taking gas out of the province without approval by a majority of producers involved in a deal and by marketing authorities.
The Alberta agency said actions by the CPUC are inconsistent with the spirit of the Canada-U.S. Free Trade Agreement and with natural gas deregulation.
A spokesman for CPUC said the agency does not plan to change its policies, which are aimed toward an "open and competitive market" for transportation services. CPUC plans further discussions with Alberta officials on the issue.
Copyright 1990 Oil & Gas Journal. All Rights Reserved.
