By: Nigel Bankes
PDF Version: Tolling Methodologies On Federally Regulated Pipelines In Northeast British Columbia
Matters Commented On: (1) National Energy Board (NEB), Letter decision on the Application of Westcoast Energy Inc for Review of the Decision of Members Ballem and Lytle, in Report GH-003-2015 (Towerbirch Report), Respecting the Toll Treatment of the Tower Lake Section (TLS), and (2) NEB letter to NOVA Gas Transmission Ltd (NGTL), Westcoast Energy Inc (Westcoast) and Alliance Pipeline Ltd (Alliance), re Examination to Determine Whether to Undertake an Inquiry of the Tolling Methodologies, Tariff Provisions and Competition in Northeast BC, 16 March 2017 (the Tolling Methodology Process Letter).
Northeast British Columbia is an area of expanding natural gas production due to a number of significant shale gas plays in the area including Horn River, Liard, and Montney.
Historically this area of the province was first served for conventional sour gas production by Westcoast Transmission. Westcoast offered producers a bundled service including sour gas processing as well as mainline transmission down to the lower mainland and on to serve markets in the Pacific Northwest. This entire system has long been federally regulated by the National Energy Board (NEB), a practice that was legally and constitutionally confirmed by the majority judgement of the Supreme Court of Canada in Westcoast Energy Inc. v. Canada (National Energy Board), [1998] 1 SCR 322, 1998 CanLII 813 (SCC). More recently the area has also come to be served by Alliance’s “bullet pipeline” and by extension of the NGTL system from Alberta into BC. The Alliance Pipeline is a point-to-point pipeline which transports liquids rich gas from this area and northwest Alberta to the Chicago market hub. Alliance came on stream in 2000. Its construction was backed by 15 year contracts. Few shippers elected to renew and “accordingly, Alliance developed its New Services Offering (NSO), which incorporated new services and tolling methodologies on the pipeline. Alliance applied for Board approval of the NSO in 2014.” The Board’s Reasons for Decision on that matter (RH-002-2014) are available here. The NGTL system is the old NOVA intraprovincial transmission system which began life in the 1950s under the name Alberta Gas Trunk Line (AGTL) and subsequently morphed into NOVA before merging with TransCanada PipeLines (TCPL) in 1998. Historically, AGTL and NOVA were provincially regulated until brought under federal regulation in 2009: see ABlawg post here. The AGTL\NOVA business model was quite different from that of Westcoast. NOVA focused its attention on the transmission system and left the producers to assume responsibility for owning and constructing in-field processing facilities to produce pipeline quality gas for delivery to the AGTL\NOVA system.
The result of these developments is that the natural gas transmission scene in northeast BC no longer looks like a natural monopoly, and has not for some long time. Instead, there is competition for natural gas production and competition to fill transmission systems with gas. No pipeline system feels this more acutely than the NGTL system and its sister, the TCPL mainline, which needs additional volumes of gas to make up for the declines in conventional gas production in the western Canadian Sedimentary Basin (WCSB).
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