Discounted natural gas approved for sale in Atlantic Canada
TC Energy can ship gas to Eastern Canada using pipeline it once hoped would carry crude oil
New Brunswick natural gas customers should get a break on their bills in the next two years now that federal regulators have approved a plan to sell more of Western Canada's discounted gas to Atlantic Canada.
The National Energy Board has approved TC Energy's agreements with natural gas retailers in Eastern Canada, including Enbridge Gas New Brunswick and Irving Oil.
TC Energy, formerly known as TransCanada Corp., will be shipping the gas east on its Canadian mainline, using capacity it had hoped to devote to its now-abandoned Energy East oil pipeline.
"We have access to very cheap gas from Alberta," said Enbridge Gas New Brunswick's general manager Gilles Volpé.
"It should provide some significant savings, in the order of 20 to 40 per cent cheaper, on the molecule side for customers starting in 2021."
The "molecule" side means the portion of a gas bill that pays the cost of the product itself. Customers also pay a distribution cost that won't be affected by the new supply contract.
Irving Oil has also signed a contract with TC Energy for Alberta natural gas that begins this November. Irving and TC did not respond to requests for comment on Monday.
The Alberta gas will provide both New Brunswick gas distributors with a new source of supply to replace Nova Scotia's offshore gas, which was declining before finally being shut down last year. Volpé says Enbridge's contract represents about half the load it needs.
The gas will travel on TC's Canadian mainline as far as Quebec, then cross the border into New England on other lines before crossing back into New Brunswick.
The National Energy Board released a 12-page ruling last month, detailing its approval of the TC application.
The decision could make it even more difficult to revive the cancelled Energy East pipeline proposal.
That project would have seen the company convert one line on its six-line Canadian mainline from the Alberta-Saskatchewan border to near the Ontario-Quebec border, then build a new line the rest of the way to Saint John for shipping heavy crude oil.
One of TransCanada's motives for Energy East was that the mainline was losing money because it was operating below full capacity for natural gas.
That's because Eastern Canadian distributors have been buying plentiful U.S. shale gas, which has driven down prices. The U.S. gas is closer, making it less expensive to ship.
"This fundamental change in North American natural gas markets requires innovative market solutions, such as long-term fixed price service offerings," the NEB said in its ruling approving the contracts.
Volpé said because TC had excess pipeline capacity, it offered just such an innovative solution, offering bidders such as Enbridge "a significant discount" on the shipping toll it will pay to get the gas all the way from Alberta to New Brunswick.
But filling some of the unused capacity on the mainline with natural gas also means that space will no longer be available for conversion to crude oil if TC ever wanted to revive Energy East.
TransCanada already ships some gas to Atlantic Canada under short-term "spot" sales, but the approval will lock in more volume over the longer term.
In its filings with the NEB, Irving Oil called the plan "extremely important … in meeting its needs for secure and reliable natural gas supplies for its operations in Atlantic Canada." Its 20-year contract starts Nov. 1.
Enbridge's 20.5-year contract for the gas starts in 2021, but Volpé said another contract for gas from an Ontario distribution hub starts next year and should mean lower rates as soon as 2020.
Enbridge says more stable pricing would also allow it to attract more customers — a prospect that has proven a challenge for the company since it began gas operations 20 years ago.
Calgary-based Enbridge recently sold its New Brunswick operations to Algonquin Power and Utilities, which will soon rebrand the provincial operation under its Liberty Utilities name.
In its filings with the National Energy Board, TransCanada says 17 companies in Ontario, Quebec, Atlantic Canada and the northeast U.S. have signed contracts for Western Canadian natural gas ranging from 10 to 20.5 years.