A Federal Court of Canada ruling involving pipeline tolls could reduce or delay plans for added gas exports from Alberta to the U.S. Northeast.
The court's Madam Justice Barbara Reed ordered the National Energy Board to conduct an inquiry into formulas used to finance pipeline construction. Projects affected include the proposed $580 million U.S. Iroquois Gas Transmission System and a $2.6 billion expansion program by TransCanada PipeLines Ltd.
In other action, Canada's federal energy minister has asked NEB whether it considered environmental factors in granting preliminary approvals for massive gas exports from the Mackenzie Delta.
THE TOLL ISSUE
Construction costs of new Canadian pipelines or expansions are calculated in a rolled-in system in which all users share costs. Opponents are seeking a user-pay system in which only companies benefiting from new export sales as a result of the new pipelines would pay the incremental costs.
The court ruling said NEB must consider the toll issue when it begins hearings in March on the TransCanada expansion project.
TransCanada said a change in the rolled-in formula for calculating tolls could reduce or delay its expansion plans, which also are linked with the Iroquois project. About 85% of gas volumes to be moved are under contract to U.S. buyers with deliveries to start in late 1991.
TransCanada Vice Pres. Art Douloff said many of the contracts with U.S. buyers are based on the present toll system.
Changes that increase transportation costs could void many contracts and reduce the size of the expansion project.
It is possible some U.S. buyers could absorb increased costs, but the ruling creates uncertainty and a potential for delay, Douloff said.
Alberta Northeast Gas Ltd., a combine of 18 U.S. gas distributors, said it is very important to maintain rolled-in tolls. A spokesman estimated user-pay tolls would raise Northeast U.S. gas delivery costs by 40-50/Mcf.
Gas export contracts will expire unless deliveries begin as scheduled Nov. 1, 1991.
The court ruled that NEB had acted unfairly when it refused earlier to consider changes to its toll formula at March's scheduled hearings.
The case for a change in toll methods was taken to the court by the Industrial Gas Users Association, representing 64 major gas buyers, mainly in Central Canada.
The Ontario government, Shell Canada Ltd., and Gulf Canada Resources Ltd. supported the IGUA, which said the present toll method will increase gas costs to Canadian buyers by $100 million/ year.
Most western Canadian gas producers support the present rolled-in system.
WHAT EPP WANTS
Energy Minister Jake Epp said in a letter to NEB he must have a full examination of the environmental issue before the federal cabinet can give final approval to an $11 billion arctic gas export project.
A spokesman for Epp said the minister is not taking a position on the issue.
"He's asking for information that will ultimately be brought to bear in deliberations before his cabinet colleagues," said Eric Alexander.
NEB Chairman Roland Priddle said the board is considering how to respond to Epp's request.
An NEB ruling on arctic export applications last fall said an environmental assessment could await a further hearing on proposed pipeline construction to link Mackenzie Delta gas to U.S. markets. The board said it will make findings at that time on economic, technical, environmental, and socioeconomic questions.
The Canadian Environmental Law Association asked the federal cabinet to overrule the NEB approval. It said the board had exceeded its authority by granting approval before considering environmental issues.
Esso Resources Ltd., Shell Canada, and Gulf Canada received approval to export 9.2 tcf of Mackenzie Delta gas beginning in 1996.
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