TWO CANADIAN GAS SYSTEMS TO BE EXPANDED

Alberta Natural Gas Ltd. and Foothills Pipe Lines Ltd., both of Calgary, have agreed on a $150 million (Canadian) pipeline expansion to ship more Alberta gas to California.

The expansion of two pipelines across British Columbia from Coleman, Alta., is subject to approval by the National Energy Board and the Northern Pipeline Agency.

A standard NEB uses to determine whether gas can be exported is under fire by buyers in the U.S. and producers in western Canada. NEB is expected to make a decision on the validity of the test by the end of March after a review of comments.

The Canadian lines are to be expanded to an undisclosed volume as part of a proposal by Pacific Gas Transmission Co., San Francisco, to expand its AlbertaCalifornia pipeline system. The agreement between the Calgary companies will be implemented only if PGT proceeds with its expansion, one of several competing proposals.

The planned British Columbia expansion would form part of the western prebuild section of the Alaska Natural Gas Transportation System. The system was built in Canada as a link to move Alaskan natural gas to southern markets.

Eastern and western legs of the line are in operation, shipping Canadian gas to markets in the eastern U.S. and California.

NEB EXPORT RULE

NEB's cost-benefit test for exports, opposed by industry, is supported by major gas customers in Central Canada and the Council of Canadians, a nationalist group. NEB used the test last November to deny permits for export requests covering 533 bcf of gas.

The test requires that exports be approved only if their benefit to Canada outweighs the cost. Among other things, the board determines whether terms of proposed export contracts cover full transportation costs as well as higher finding costs for replacement reserves.

In its ruling last November the board said, "The benefits and costs of a project are different for the parties undertaking it than they are for the country as a whole."

Several U.S. firms, prospective gas buyers in the rejected export applications, have appealed the NEB ruling to the Federal Court of Canada. They say the test sets a minimum price for Canadian gas exports and therefore violates the Canada-U.S. Free Trade Agreement.

WHAT INDUSTRY THINKS

NEB received about 60 filings when it called for written submissions following protests against its November decision. Comments by the Canadian Petroleum Association and Independent Petroleum Association of Canada, representing most producers, opposed the test.

IPAC said the NEB is not required to determine whether a proposed export of gas is in the public interest, nor is it required to take account of differences between social and private costs.

San Diego Gas & Electric Co. said, "The credibility of Canada's oft-repeated commitment to deregulation and the spirit of the Free Trade Agreement are at stake."

ANR Pipeline Co. said the test discriminates against gas sales to U.S. buyers by imposing a much higher standard of review upon export contracts solely because the gas will cross the international border.

The Saskatchewan government called the NEB test " a de facto price test," forbidden under the Free Trade Agreement.

CIL Inc., a major Ontario industrial gas consumer, said the public interest must be considered in sales.

"The NEB Act and common sense dictate that long term exports of valuable nonrenewable resources should be measured against some yardstick of national public interest," CIL said.

ICG Utilities, a major Ontario customer for western gas, said the test is an important component of the NEB examination of export applications.

And Union Gas Ltd., Chatham, Ont., said only the NEB is able to evaluate proposed exports of gas from a broader national perspective. It said producers, shippers, exporters, consumers and the various provinces have separate, parochial interests.