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TransCanada's Keystone pipeline facilities are seen in Hardisty, Alta., on Friday, Nov. 6, 2015.

Jeff McIntosh/THE CANADIAN PRESS

Frustration and costs are mounting for natural gas producers over frequent outages on TransCanada Corp.'s Alberta pipeline network that have limited shipments and put heavy pressure on prices for the fuel.

TransCanada is conducting work on a northwestern portion of the vein-like system through which gas from the country's most prolific deposit – the Montney – flows, disrupting operations. Unrelated maintenance in Alberta's southeastern corner has also backed up volumes.

The loudest complaints are coming from producers that purchased long-term "firm" transport contracts from TransCanada, intended to give them priority for their shipments. The companies have since been hit with a string of service interruptions, prompting some to take the step of paying for more volume than they can deliver to ensure they have enough capacity on the province's main pipeline system.

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The current outage – being conducted to make repairs and to connect a new section of pipe – is the fourth and largest since May. In the energy business, friction between producers and pipeline companies is not new. But now it comes as producers are struggling with weak North American gas prices and projections calling for more of the same, possibly for years. Meanwhile, Montney production is booming as companies take advantage of hydraulic-fracturing technology to unlock reserves.

Peyto Exploration and Development Corp., a large Montney gas player, bought more service than it needed during the second quarter, and is doing so again to make sure its gas can get to market, said chief executive Darren Gee.

"It's very frustrating for us that we have to pay more for service just to be able to get the original service we thought we were entitled to in the first place," Mr. Gee said in an interview.

The extra expense is "not immaterial," but necessary as others do the same, Mr. Gee said. Some of the contracts were signed in 2012 in anticipation of a new market in the form of a pipeline to a liquefied natural gas plant on the West Coast, he said. Malaysia's Petronas, the front-runner to build a multibillion-dollar LNG facility, scrapped its plans last month.

Bonavista Energy Corp. is another producer that contracted for firm space above its forecast production, to ensure its gas got to a trading hub, the company said in its second-quarter results. ARC Resources Ltd. incurred extra costs to ensure it could move all its production as well.

Currently, up to a billion cubic feet a day of capacity is temporarily offline in the James River portion of TransCanada's Alberta system, according to the company, which says it has communicated extensively on the issue with its customers. That portion normally moves up to roughly 10 billion cubic feet a day.

Meanwhile, reduced capacity to get gas out of Alberta fills up storage facilities and drags down prices. Indeed, last week, the wholesale gas price at the AECO storage hub fell as low as 49 cents a gigajoule on the NGX electronic exchange amid pipeline maintenance at what is known as the Eastern Gate of the Alberta system near the Alberta-Saskatchewan border. By comparison, U.S. gas on the New York Mercantile exchange sold for the equivalent of nearly $4 a gigajoule on Friday.

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At times in recent weeks, AECO gas changed hands for negative values. In mid-June it was worth more than $2.20 a gigajoule.

Mr. Gee said that any of Peyto's production that is not covered by forward sales at set prices, about 10 per cent of its total output, gets shut off until prices improve.

For its part, TransCanada said it must perform maintenance and add capacity to meet customers' needs, and that it does what it can to minimize disruptions. For example, the timing coincides with a period in which demand is at a seasonal low, said Shawn Howard, a spokesman for the company.

"We do recognize that this will have an impact for our shippers, which is why we provided early notification to them in meetings, conversations, maintenance plans and our monthly outage forecasts so they could plan appropriately," he said in an e-mail.

"It's important to note that we have communicated and collaborated with our customers closely over the past nine months, and many of them have built their own maintenance activities around this schedule to reduce the impact they would experience."

Raymond James, the investment dealer, published a caustic missive last week charging that TransCanada – though not mentioning the company by name – is the most dominant member of an oligopoly, in which scant competition breeds poor service and clients have no recourse for cancelled shipments. The outages happen each summer, it said.

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The other major operators in the region are Enbridge Inc., which runs the British Columbia system, and Alliance Pipeline, which extends to Illinois in the United States.

"True free marketers might say buyer beware and the producer should just shop better in the future when looking for sales outlets," Raymond James said.

"But there are frankly no practical alternatives. To add further injury to this insult, the lack of execution on contracted firm services to sales then negatively impacts the producer's reported results which typically increases debt and interest expenses while also damaging cost of capital in equity markets."

Other losers include governments, which suffer as royalty payments fall, putting more pressure on taxpayers, it said.

TransCanada countered that the interruptions caused by the work will benefit producers in the long run because the system will have higher overall capacity.

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