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By: Luke Takeuchi

The TransCanada Corporation is currently in a bid to reduce the toll cost of transporting natural gas across the country’s Mainland pipeline. Its plan is to raise the transportation tolls where the demand is strongest, in Western Canada, to offset the significant costs of the lesser used Mainland pipeline.

While this plan seems fair in sharing the costs of transporting natural gas across Canada there are many energy companies, like EnCana, who are opposed to the bid. While at the same time many underlying implications could affect the entire region if the situation in the Mainland is not handled correctly.

TransCanada is engaged in this bid due to the significant decreases in transporting volume through the Canadian Mainland pipeline, which ranges from Alberta/Saskatchewan to east boarder of Quebec. This decrease in volume has been occurring since the 1990’s and has resulted in price increases to cover the cost of transporting what natural gas is being sent through. Last year alone the cost of transporting natural gas through the Mainland pipeline increased by approximately 38%. 

To alleviate this problem TransCanada’s talks have been centered on trimming the costs of shipping through the Mainland pipeline to ensure its business in these regions may prosper. It is TransCanada’s desire is to shift the cost of shipping gas from where it is relatively inactive in the Mainland to where the pipelines are in heavy use, in Alberta and British Columbia.

EnCana, one of the top natural gas producers in North America, does not agree with the approach of cost-shifting between systems out of fairness as the majority of its Canadian operations are located in the Western region. However Encana does support TransCanada’s notion of making toll costs more competitive overall.

If TransCanada does move forward with cost-shifting between Mainland and Alberta system, natural gas end users who are connected to the Western Canada pipeline system can expect an increase in the transportation costs on their natural gas bill.

With the cost of shipping gas through the Mainland pipeline being its current focus, TransCanada states that a cause of this problem are shale gas discoveries in Texas, Pennsylvania, and British Columba. But the cause of this problem will eventually become its savior. TransCanada states that these discoveries will spawn a huge demand for use of the pipeline in Canada in the future. With 1.5 billion cubic feet a day of shale gas already being contracted today, TransCanada is forecasting that the revenue derived from these future operations will help to offset some of the losses it has experienced with the Mainland pipeline in these recent years.

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Luke Takeuchi is a recent business graduate & currently operating as a marketing analyst at Energy Advantage Inc.