CAPP, other stakeholders and NOVA Gas Transmission (NGTL) have reached agreement on significant changes to the way that NGTL charges for its services. NGTL is the main natural gas transmission pipeline in Alberta and moves over 11 Bcf of gas every day. The successful completion of these negotiations is a significant achievement for the parties involved. The agreement and the revised tariff will be submitted to NGTL’s regulator, the National Energy Board, for approval.
The Settlement
Increasing intra-Alberta gas demand, mainly from the oilsands, is the major driver for over $2 Billion of NGTL facilities. Given this growth, the primary purpose of a change in NGTL toll design was to address some shippers’ concerns that the toll for delivering gas inside of Alberta was not sufficient to cover these costs. At the request of the Alberta Energy and Utilities Board (NGTL’s regulator at the time) NGTL and its stakeholders undertook an extensive review of toll design.
Through that review, stakeholders and NGTL developed a proposed rate design that is significantly different from the current design. Importantly though, the new rate design maintains the fundamental element of separate receipt and delivery services that allows the Alberta “NIT” market, currently one of the largest gas markets in North America, to continue to function unchanged.
The main impact of the toll design change is that the toll for deliveries inside Alberta will increase while tolls to bring gas onto the pipeline will be lower. Tolls to deliver gas to major interconnecting pipelines, like those leaving Alberta, may be slightly higher in the short term but as gas consumption in Alberta increases those tolls will be lower than what they would otherwise be.
Impact on the Industry
NGTL moves about 90% of the natural gas in Alberta so chances are that any Alberta gas producer uses NGTL to get product to market. Many CAPP members are also big gas consumers, moving gas on NGTL to miscible flood schemes, electric generation facilities, refineries, upgraders and oil sands operations. As both producers and consumers of natural gas, CAPP members pay a large portion of the $1.1 billion annual cost of moving gas on NGTL.
The agreed toll design will change who pays what share of that $1.1 billion cost; individual shippers or groups of shippers will see an impact but the overall cost of moving gas on NGTL will not change as a result of this settlement. Gas producers will see the cost of transportation go down slightly. None of the changes will happen suddenly; the new toll design will be phased in over 5 years.