TransCanada pipes Pennsylvania gas to Ontario

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The gas stoves in the Greater Toronto Area may not have flickered on Thursday. But their blue flames, fuelled for decades largely by products pulled from the ground in Western Canada, were suddenly very different.

For the first time, some of the gas flowing into the Golden Horseshoe came from Pennsylvania.

On Nov. 1, TransCanada Corp. began pumping gas from the U.S. Marcellus field across the Canadian border just north of Lewiston, N.Y. Although some U.S. gas has found its way into Ontario for many years – from Oklahoma, Michigan and elsewhere – Central and Eastern Canada have, since the 1950s, largely relied on Alberta energy.

The advent of Marcellus gas stands to fracture that lengthy history. Beginning last March, TransCanada spent $130-million to reverse and expand pipelines running from the Niagara Peninsula to Toronto. On Thursday, it began pumping nearly 400 million cubic feet per day of Pennsylvania product into the province. That is equivalent to 16 per cent of the average daily gas demand in Ontario.

"It's the first time that this reservoir of gas has reached Canada," said Karl Johannson, president of natural gas pipelines for TransCanada.

It's a dramatic shift. The pipeline carrying the Marcellus gas once carried Canadian product south into the United States. In recent years, that export flow largely dried up. Now, the same pipe is being used to import foreign energy – produced using controversial hydraulic fracturing techniques – and displacing Canadian supplies.

"Marcellus gas coming into Ontario does have an impact on the exports from the Western Canadian Sedimentary Basin," Mr. Johannson said. "What that total impact will be, it's hard to tell."

That's because this is likely the beginning of a process that stands to substantially weaken cross-Canada energy ties. Last year, TransCanada sought support for more Marcellus imports. It was not successful in garnering much interest then, but the Marcellus is one of the most prolific gas plays in North America today, and TransCanada intends to try again early next year.

The company estimates it could carry an extra billion cubic feet a day across the border near Niagara. At the same time, another proposed pipeline called Nexus, backed by Enbridge Inc., DTE Energy and Spectra Energy Corp., is working to carry another billion cubic feet a day into Ontario near Sarnia. Those two projects stand to meet the entire average Ontario demand with U.S. gas – although the coldest winter days would still require energy from other sources.

The first Marcellus shipments are "a sign of the opportunity for both U.S. production and the Canadian markets that can be further benefited when we can get some new infrastructure in there," Spectra spokeswoman Andrea Grover said.

The use of Pennsylvania gas holds several benefits for Ontario. It is cheaper to bring in: It costs about $1.50 to carry a Gigajoule of Marcellus gas into Ontario, and about $2.10 for the same quantity of Alberta gas.

But for Ontario buyers, it holds another advantage: The addition of a new gas seller provides a more competitive market for big distributors such as Enbridge Inc., as well as an important alternative supply.

"It's access to a basin that's growing by leaps and bounds," said Malini Giridhar, senior director of gas supply for Enbridge Gas Distribution in Toronto. "We definitely want to be connected to emerging basins."

Those emerging basins are rewriting the energy geography of North America in ways not anticipated just a few years ago. The changes are hurting Western Canada, but even TransCanada will feel the pain because it runs many of the cross-Canada pipelines that have long carried Alberta gas east.

Still, Mr. Johannson said the company is better to carry that gas, rather than watch someone else move it. "It may displace some long-haul volumes, but it's better than not having any volumes on the system at all."