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    Canada’s Regulator Approves North Montney Mainline


Updated: Adds comments from TransCanada CEO, Peyto CEO

by: Dale Lunan

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Canada’s Regulator Approves North Montney Mainline

Canadian regulator the National Energy Board (NEB) on May 23 recommended approval of an application from TransCanada’s Nova Gas Transmission Limited (NGTL) for its North Montney Mainline (NMML) variance project.

But NGTL won’t be allowed to roll the tolls for the facilities covered by the project into its overall rate base. Instead, the board directed NGTL to establish a separate cost pool for the NMML facilities, and while it will be allowed to calculate its revenue requirement by combining the NMML revenue requirement with the revenue requirement on the existing system, it won’t be allowed, for a provisional period of one year, to apply the toll ceiling to firm transportation – receipt rates.

After the one-year provisional period – if NGTL hasn’t already applied for and earned approval of a new toll structure for NMML – it will be required to calculate and apply tolls for the facilities on a stand-alone basis.

NMML was initially approved by the NEB in 2015 as a 700mn ft3/day collector system for gas destined for the Petronas-led Pacific Northwest LNG project on BC’s west coast. When Petronas cancelled that project in 2017, TransCanada filed a variance application with the board asking for authorisation to increase its capacity to nearly 1.5bn ft3/day and use the new facilities - some 206 km of new pipe, compression and eight new meter stations - to move gas from Montney fields in northeast BC to the AECO/Nova Inventory Transfer market in Alberta. Subject to timely federal approval of the NEB's recommendation, TransCanada hopes to begin construction in the third quarter this year and have the new facilities in service by the middle of 2019.

In a statement released May 24, TransCanada said the NMML approval represents a significant component of NGTL’s $7.2bn multi-year infrastructure expansion program that will increase transportation capacity for western Canadian producers and provide downstream markets increased access to clean-burning natural gas.

“We are pleased with the NEB’s decision on the North Montney Mainline Project. These facilities are critical to the timely and economic development of the tremendous natural gas resource in the North Montney play," TransCanada CEO Russ Girling said. “Since 2011, the project has undergone thorough consultation, engagement and rigorous regulatory assessment. Through this process we have demonstrated the importance of this critical piece of energy infrastructure to natural gas producers and downstream markets throughout Canada and the US.”

Producers and the Alberta government, however, were opposed to the variance application because the new plan would push more gas into the already oversupplied AECO market, while Enbridge-owned Spectra Energy, which operates the competing Westcoast Transmission pipeline, objected to TransCanada’s intent to roll NMML tolls in with existing NGTL tolls – essentially forcing all NGTL shippers to subsidize the 11 shippers who will use the NMML facilities.

“The board finds that applying NGTL’s existing tolling methodology to the NMML facilities over the long term would not result in just and reasonable tolls,” the NEB said in its reasons for decision. “Such tolls would neither adhere to the principle of cost causation nor foster the goal of economic efficiency.”

Darren Gee, CEO of Peyto Exploration & Development - part of the so-called PMC Producer Group that was opposed to the plan - said he was definitely for” building more pipeline infrastructure in the Western Canadian Sedimentary Basin, but questioned the wisdom of adding NMML capacity when egress capacity - to take natural gas out of western Canada to markets east and south - remained constrained.

Adding more supply to the NGTL system does no good until the system can be expanded,” he said in an email to NGW. As it is, NGTL can't move all the supply to markets outside of Alberta. We lobbied that the expansion of the NGTL system had to happen before the NMML was built. It is the lack of egress that is crushing AECO, not lack of connectivity.