Gas distributors stand by concerns over Energy East pipeline

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The battle between TransCanada Corp. and Central Canadian natural gas utilities over the controversial Energy East pipeline is heating up as an east-west fight.

In an interview Wednesday, Union Gas Ltd. president Steve Baker said TransCanda the Calgary pipeline company is forcing gas users in Ontario and Quebec to pick up part of the tab for providing market access to western oil producers.

He was responding to TransCanada CEO Russ Girling who told The Globe and Mail recently that the claims of the local distribution companies (LDCs) are "ludicrous."

"As three eastern LDCs, we're not in the business of opposing infrastructure for no reason," Mr. Baker said. "For them to dismiss it out of hand and not take it seriously, I'm not sure why that's the case, but we certainly feel it is a pretty big issue."

Union has joined Enbridge Gas Distribution and Montreal-based Gaz Métro in demanding that TransCanada amend its proposal so as to provide a better deal for existing gas customers. Mr. Baker pointed out that Quebec's energy regulator – while generally endorsing the Energy East project – raised concerns about risks for gas consumers. It urged TransCanada to ensure those existing customers don't subsidize the oil shippers.

"What they recognized quite rightly is that the project is an oil project and that it is exposing the gas market to costs and risks that we don't have today," Mr. BakerMr. Baker said.

TransCanada's $12-billion Energy East project would convert a gas pipeline to carry crude from Alberta to the Ontario-Quebec border and then the company would build a new pipeline to deliver the oil to Saint John, N.B.

Mr. Baker said the gas utilities support 90 per cent of the project but are concerned about the loss of a North Bay-to-Cornwall, Ont., stretch that carries American gas to eastern Ontario and Quebec. That portion of the generally underutilized mainline operates close to capacity for much of the winter.

TransCanada proposes to replace that capacity with a new line from Southern Ontario to Quebec., and says all customers who sign up for firm service will be served. It has launched a second "open season," the process used to assess demand for additional capacity.

The Union Gas president also argued that TransCanada's plan would leave gas customers vulnerable to cost overruns, would not serve current consumers who can't commit to 15-year contracts and has no provision for demand growth. And he said the pipeline company would force gas customers to foot the bill for any capacity required under the current open season.

The LDCs have asked the National Energy Board to delay hearings on the Energy Eastproject. and force TransCanada to provide a better assessment of gas demand in the Central Canadian market.

TransCanada argues that it is willing to ensure that gas customers get the capacity they need, but that those consumers should commit to long-term contracts needed to underpin its construction. Mr. Girling slammed the LDCs for launching a public campaign that warned of shortages in hospital and schools.

But Mr. Baker said Unions and its partners felt they had no option but to mount a public campaign, given TransCanada's public relations effort to win support and its refusal to deal with their concerns.

The local utilities also mounted a campaign to have its customers and eastern industrial users write letters to the National Energy Board backing their stands.

In filing last week, TransCanada's lawyer Kemm Yates slammed the letter-writing campaign, arguing that it was an "insult" to the regulatory process and that board should ignore it..