Burlington, Ontario, 01-March-2011 - The rising Trans Canada Pipelines (TCPL) tolls will inflict financial pain on energy end users. As can be seen from the graph below, the TCPL firm tolls to the Eastern Zone, which were relatively stable and averaged $1.10/GJ in the 10 year period from 1999 to 2009, shot up from $1.19/GJ in 2009 to $1.64/GJ in 2010 and to $2.24/GJ in 2011. This is an increase of 88% in the last two years. Short haul tolls within Eastern Canada have also increased by a similar order of magnitude.

This toll increase is a result of the volumes on the TCPL mainline between Empress (on the Alberta border) and Eastern Canada decreasing significantly over the last few years. The mainline is now operating at approximately 50% of capacity. The decrease in volume is due to the rapid growth of shale gas production in the United States, namely from the Marcellus field in Pennsylvania and in the surrounding states, and to the declining production of conventional gas in Canada.

Under the current tolling methodology set by the National Energy Board of Canada (NEB), TCPL is a cost of service pipeline whereby its total annual operating costs are divided by the projected volume throughput to determine the unit rate paid by the shippers.

The NEB has approved the Interim toll to the Eastern Zone of $2.24/GJ, as requested by TCPL, effective March 1, 2011 and has instructed TCPL to submit its final 2011 toll application by May 2, 2011.

TCPL is attempting to negotiate a settlement with the major shippers, before that date. If no agreement can be reached, the NEB will hold hearings, either in the summer or early fall 2011, to obtain the shippers’ arguments and recommendations, before rendering a decision.

However, with the rapid growth of very competitively priced shale gas production in the Eastern part of North America, it is difficult to see how the TCPL mainline utilization rate can be maintained, let alone increased. Creative regulatory measures will have to be implemented to balance the interest of all the stakeholders – energy end users, the Western Canadian producers and TCPL.

Energy end users that have turned back a high portion of their TCPL capacity over the years will be partially shielded from these significant increases. For energy end users that still have some TCPL capacity, Energy Advantage can help you make more favorable transportation arrangements. Contact Energy Advantage today for more information.

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